Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

BILLS PRESENTED

EDINBURGH CORPORATION ORDER CONFIRMATION

Bill to confirm a Provisional Order under the Private Legislation Procedure (Scotland) Act 1936, relating to Edinburgh Corporation, presented by Mr. Noble (under Section 7 of the Act); and ordered to be considered upon Tuesday next and to be printed. [Bill 44.]

PAISLEY CORPORATION ORDER CONFIRMATION

Bill to confirm a Provisional Order under the Private Legislation Procedure (Scotland) Act 1936, relating to Paisley Corporation, presented by Mr. Noble (under Section 7 of the Act); and ordered to be considered upon Tuesday next and to be printed. [Bill 45.]

Oral Answers to Questions — SCIENCE

Social Science Research Council

Mr. Hector Hughes: asked the Parliamentary Secretary for Science if he will make a statement about the scope, purpose and personnel of the social science research council which he has set up.

Mrs. Hart: asked the Parliamentary Secretary for Science if he is now able to make a statement on the establishment of a social sciences research council.

The Parliamentary Secretary for Science (Mr. Denzil Freeth): The Government have not set up a social science research council, and I cannot,

for the present, add anything to the Answer which I gave to the hon. Member for Edmonton (Mr. Albu) on 21st May, 1962.

Mr. Hughes: If the Parliamentary Secretary cannot add anything after this long time, does he agree that it should be within the scope of any social science research council to stop the trend to the south of Britain, which is continuing the obnoxious policy of the clearances, which is depopulating the north of this island, which is overcrowding the south, and which is driving trade, industry and commerce to the south? Will he formulate and implement a really constructive policy which will reverse that very objectionable practice?

Mr. Freeth: As I understand it, the duties of a social science research council in the minds of those who put it forward, would be to collate existing research and stimulate further research. I think that the actions which the hon. and learned Gentleman has in mind would be actions for the executive departments of the Government to undertake.

Mr. Albu: Has the Minister seen the very interesting discussions that have recently been going on in the Press on the formation of a social research council, most of those taking part supporting the idea? Is he aware of the growing interest in social science research which is demonstrated by the success of the new periodical, New Society?

Mr. Freeth: I have seen New Society, and I am most heartened by the growing interest in the social sciences to which the hon. Member referred. The actual establishment by the Government of a social science research council goes beyond the Departmental responsibilities of my noble Friend, and would have to be a Government decision.

Civil Scientific Research (Committee)

Mr. Albu: asked the Parliamentary Secretary for Science whether the terms of reference of the Committee on Civil Scientific Research include the problems involved in Government support of technological development.

Mr. Denzil Freeth: This Committee is concerned with organisation, and so far as the problems concerned are, or cannot be dissociated from, organisational problems, they are within the terms of reference.

Mr. Albu: Is the hon. Gentleman satisfied that the existing Committee is sufficiently strong on the scientific and engineering side to be able to make the sort of recommendations concerning, for instance, development contracts in industry, and other ways of supporting more scientific industrial development which obviously is necessary?

Mr. Freeth: The purpose of the Committee is to consider matters raised within its terms of reference. It is primarily a Committee to deal with the organisation that should exist between Government and science, and I think that its members are excellent people for this purpose.

Multiple Sclerosis

Mr. H. Hynd: asked the Parliamentary Secretary for Science what information he has about progress in finding a cure for multiple sclerosis; and if he will make a statement.

Mr. J. Howard: asked the Parliamentary Secretary for Science what resources, in terms of money and manpower, are being devoted to research upon multiple sclerosis; and what progress is being made.

Mr. Denzil Freeth: Research into multiple sclerosis is being supported from public funds by the Medical Research Council and by university and hospital departments. In addition, a valuable contribution is being made by voluntary organisations, such as the Multiple Sclerosis Society and the Nuffield Foundation. A great deal of fundamental research which may prove relevant to the understanding of demyelinating diseases, is also being undertaken. I therefore regret that it would not be possible to estimate the expenditure and manpower involved in research relevant to this disease.
Progress in this research is, unfortunately, slow, but the problem is being attacked along several lines, and every effort will be made to follow up promising leads.

Mr. Hynd: As it is clear from the Minister's answer that no cure is so far available in this country, and as there are pretty strong claims of a cure being available across the Channel, is it not possible for the Ministry to enable patients from this country to go abroad to get the treatment that is apparently available there?

Mr. Freeth: With regard to the last part of the hon. Member's supplementary question, this would, of course, be a matter for my right hon. Friend tile Minister of Health. With regard to the Le Gac method, which involves the administration of antibiotic drugs, I can only tell the hon. Member that tests carried out in this country for evidence of infection by such organisms as the method presupposes in persons suffering from multiple sclerosis have so far been negative.

Mr. Howard: May I draw my hon. Friend's attention to the promising ine of research being undertaken at Leeds and Newcastle, and urge him to implement the promise of Her Majesty's Government by giving more support to these two projects?

Mr. Freeth: I am not aware of any worth-while line of study put forward by a first-class man in relation to the causes of this disease for which a grant applied for has not been granted. If my hon. Friend has any particular lines of approach in mind, I should be most happy to bring them to the notice of the Medical Research Council.

Mr. Mitchison: Is the Parliamentary Secretary aware that this is a very dreadful and a very painful disease? Apparently, he has at present no suggestions to make for approaching a treatment or a cure of the disease. Will he think over the matter again and, at a suitable time, make a statement in the House as to what steps are now being taken to do something about it?

Mr. Freeth: The hon. and learned Gentleman is, if I may say so, quite wrong. The Medical Research Council is following up a number of leads. In 1961, it set up a research group on demyelinating diseases, and in the last 12 months has held no fewer than two conferences on these particular types of disease in order to provide leading research workers


in different disciplines with the opportunity of discussion and exchange of views, out of which it is hoped further promising lines of research might appear.

Ntional Productivity Year

Mr. Bence: asked the Parliamentary Secretary for Science what work is being undertaken by his Department in the field of productivity during the National Productivity Year.

Mr. Denzil Freeth: Where work undertaken by the organisations for which my noble Friend is responsible has some bearing on productivity, these are cooperating with the organisers of National Productivity Year. Some time ago my noble Friend asked the Department of Scientific and Industrial Research, the organisation with the most direct bearing on the subject, to bear the objectives of National Productivity Year very closely in mind.

Mr. Bence: It is not sufficient just to bear the matter in mind. Would not the hon. Gentleman agree that there are here possibilities of major breaks through in all fields of production; and that, if we do not do something far stronger than he has stated, Britain may well not be able to maintain or advance her standard of living in the future? Will he ensure that his Department does much more than just the mediocre work it is doing at present?

Mr. Freeth: I do not think that we are doing work that is only mediocre, either in quantity or quality.

Scientific Manpower (Training)

Mr. Bence: asked the Parliamentary Secretary for Science to what extent his Department is co-operating with the National Foundation for Educational Research in promoting scientific training.

Mr. Denzil Freeth: Research in education is the responsibility of my right hon. Friend the Minister of Education. The Advisory Council on Scientific Policy, and its Committee on Scientific Manpower, have under regular review general issues concerning the training and education of scientific and technological manpower, and my noble Friend is in close touch with my right hon. Friend the Minister of Education on these matters.

Mr. Bence: Is the Parliamentary Secretary aware that, according to the 1960–61 Report, the grant to this Foundation was advanced from £3,000 to £7,000? Does he consider that, in the sphere of educational research, this is a reasonable contribution to such a body, when scientific and technological education is so important in this age?

Mr. Freeth: That grant was given by my right hon. Friend the Minister of Education, and the hon. Member must question my right hon. Friend about it.

Mr. Boyden: Would it not be sensible for the hon. Gentleman's Department to have consultation with the National Foundation apropos some of the problems, so that the research organisation can consider what is in his Department's mind?

Mr. Freeth: My noble Friend and my right hon. Friend keep in close and continuing consultation in this and kindred matters.

Research (Expenditure)

Mr. J. H. Osborn: asked the Parliamentary Secretary for Science what has been the total expenditure this year on research, excluding space research and human sciences, by the Department of Scientific and Industrial Research; how this has been spent; and how this compares with similar expenditure in previous years.

Mr. Denzil Freeth: The sums for which my hon. Friend has asked were for 1959–60, £11·1 million; for 1960–61, £13·3 million; for 1961–62, £15·2 million; for 1962–63—provision in Civil Estimates—£18·5 million. The provision in the 1962–63 Civil Estimates is, therefore, 66⅔ per cent. above actual expenditure in 1959–60. I will circulate with the OFFICIAL REPORT a breakdown of these figures.

Mr. Osborn: While thanking my hon. Friend for that reply, may I ask whether he can state now how much of that expenditure has gone to research associations?

Mr. Freeth: The annual payment to research associations has been about £2 million. The annual increase has been about 8 per cent.

Mr. Mitchison: Does not the Parliamentary Secretary admit that both the first set of figures and the last figure he gave are painfully inadequate in view of the importance of science in the world today? How do those figures compare with expenditure in other countries?

Mr. Freeth: It is very difficult to get exact comparisons with other countries, because virtually no other country has a body with exactly the same functions and limits as the D.S.I.R. The size of the grant to research associations is, of course, related to the contributions of the industrial firms for whose benefit the research associations exist.

Sir H. Legge-Bourke: Whilst I welcome the improvement that my hon. Friend has announced, may I ask him whether he would agree that before one can possibly assess the full measure of

D.S.I.R.'S EXPENDITURES ON RESEARCH OTHER THAN SPACE RESEARCH AND HUMAN SCIENCES IN THE LAST THREE FINANCIAL YEARS AND THE COMPARABLE PROVISION IN THIS YEAR'S ESTIMATES HAVE BEEN:—


£'000



1959–60
1960–61
1961–62
1962–63 (Provision in Civil Estimates)



£'000
Per cent. of total
£'000
Per cent. of total
£'000
Per cent. of total
£'000
Per cent. of total


D.S.I.R. Research Stations
6,297
57
7,530
56
8,227
55
9,332
50


Research in Universities
1,765
16
2,548
19
3,434
22
4,732
26


Research in Industry—


(a) Research Associations
1,787
16
1,928
15
2,121
14
2,215
12


(b) Development Contracts
—
—
—
—
11
—
520
3


Contribution to the European Organisation for Nuclear Research
1,259
11
1,330
10
1,359
9
1,700
9


Total
11,108
100
13,336
100
15,152
100
18,499
100

Fast Breeder Reactor, Dounreay

Mr. J. H. Osborn: asked the Parliamentary Secretary for Science what is the highest power output, in megawatts, at which the fast breeder reactor at Dounreay has been operated; and how this compares with the output achieved by other reactors of the same type elsewhere in the world.

Mr. Denzil Freeth: The highest power level reached by the Dounreay fast reactor is 30 megawatts (heat). I am

the effort of this country, one must take into account the contribution of industry itself?

Mr. Freeth: Yes, indeed. One should consider also the contributions of Government, through the defence Departments, to industrial research, and there is a later Question on that aspect.

Mr. Albu: In the figures that the Parliamentary Secretary is to publish in the OFFICIAL REPORT, will he give a column showing the figures at constant prices?

Mr. Freeth: I am not sure that I can get out that information in time for publication in tomorrow's OFFICIAL REPORT, but I shall certainly see to its preparation, and send it to the hon. Member.

Following is the information:

informed that the Soviet reactor B.R.5 has operated at five megawatts (heat) and the U.S. reactor E.B.R.-1 at about 1½ megawatts (heat).

Mr. Osborn: I thank my hon. Friend for that reply, but would he tell us how much has gone to the grid and what the costs are likely to be when these experiments have been completed?

Mr. Freeth: The aim is that this should be an experimental reactor, and


any electricity actually produced is a by-product of its research purpose. So far, it is generating about 3 megawatts of electricity. I cannot tell my hon. Friend what the total cost of the Dounreay reactor will be by the time all the experimental work on it has ceased, because I think that it will remain a very fine experimental tool for a considerable number of years.

Industrial Accidents (Fatigue)

Mr. Boyden: asked the Parliamentary Secretary for Science what investigations are being currently undertaken under his auspices into the importance of fatigue as a cause of industrial accidents.

Mr. Denzil Freeth: The Medical Research Council is carrying out studies on the effects of fatigue as part of a wide programme of research on factors affecting the safety, comfort and efficiency of industrial workers. I will send the hon. Member details of these studies.

Mr. Boyden: Does the research look particularly at the vast increase in juvenile accidents, and has it got any bearing on what responsible trade union leaders think—that there is a very great correlation between accidents and juvenile fatigue?

Mr. Freeth: I cannot say, offhand, that it has a special emphasis on the juvenile problem, but that is, in fact, considered as part of the general problem among all-age groups.

Industrial Employment (Older Workers)

Mr. Boyden: asked the Parliamentary Secretary for Science what investigations are being undertaken under his auspices on how suitability for industrial employment is affected by age.

Mr. Denzil Freeth: The Medical Research Council has supported for some years studies of the psychological changes that occur with age, with particular reference to the suitability of older workers for various types of industrial work. The Department of Scientific and Industrial Research is also supporting a research project concerned with the training of older workers.

Mr. Boyden: Is sufficient publicity given to the fact that a good deal of nonsense is talked and thought about people being too old at 50? Do the investigations study the situations which arise in areas like mine, where a great many people, highly suitable for work, are faced with long periods of frustration because they are out of work at 50 or 55 through the closure of pits and so on?

Mr. Freeth: Yes, indeed. In 1961, the Council issued a memorandum entitled, "Ageing and the semi-skilled. A survey of manufacturing industry on Merseyside". Although limited to Merseyside, the memorandum's conclusions are of wide application. A major finding was that the slowing down of older workers was widely held by knowledgeable people in industry to be largely compensated for by their skill, experience and conscientiousness.

Horticultural Research Establishments (Visits)

Mr. J. Wells: asked the Parliamentary Secretary for Science how many horticultural research establishments the Minister for Science and he have visited since they took up their appointments, and how many more they plan to visit before the end of this year.

Mr. Denzil Freeth: The 18 agricultural research institutes and units which have been visited by my noble Friend or myself include four of the centres at which research relevant to horticulture is carried out. No further visits are planned for the remainder of this year, but we hope to make further visits in future.

Mr. Wells: Is my hon. Friend satisfied that he and his noble Friend are paying sufficient attention to the important requirements of horticulture?

Mr. Freeth: Yes. The fact that we have not visited stations does not mean that we do not take any interest in them. Equally, there is an enormous number of agricultural, industrial, medical and other research establishments which come under my noble Friend indirectly through the research councils, and the Atomic Energy Authority, and there are often important


problems at those stations which necessitate our having to visit them and not others.

Horticulture (Research)

Mr. J. Wells: asked the Parliamentary Secretary for Science what sums have been spent on scientific and other research for the benefit of horticulture in each year for the past 10 years; what plans he has for increasing this research effort in the future; and how widely and quickly the results of research are made known to growers.

Mr. Denzil Freeth: With permission, I will circulate in the OFFICIAL REPORT tables showing Government expenditure, in each of the past 10 years, on research concerned with horticulture which is carried out at those Government research stations which are primarily concerned with horticulture, as well as at the experimental horticulture stations of the National Agricultural Advisory Service and at Colleges of Agriculture in Scotland. In addition, research of direct or indirect benefit to horticulture is carried out at other stations and units of the Agricultural Research Council. Some expansion of this research is being undertaken, including the establishment of a new Unit of Flower Crop Physiology. The results of research are disseminated regularly through scientific and horticultural publications, through the Agricultural Advisory Services, and through open days and membership schemes organised by stations and institutes.

Mr. Wells: Is my hon. Friend satisfied that sufficient practical, useful information comes from these centres and is put over to our growers in simple language? As my hon. Friend is aware, horticulture is built up of many small units and it is important that this matter should be put over to the small agriculturalists and the small growers simply. Is this being done?

Mr. Freeth: It is impossible with so variegated an industry, in which the individual grower occupies so important a position, for all growers to be able to visit the stations of the Agricultural Research Council, and the A.R.C., therefore, has to rely very largely on the N.A.A.S. to disseminate the results of its research to the individual grower.

Following are the tables:

TABLE I

EXPENDITURE AT CERTAIN AGRICULTURAL RESEARCH INSTITUTES

The Institutes to which this Table relates are:—

Ditton Laboratory, Larkfield, Kent.
East Mailing Research Station, Maidstone, Kent.
Glasshouse Crops Research Institute, Littlehampton, Sussex.
John Innes Institute, Bayfordbury, Herts.
Agricultural and Horticultural Research Station, Long Ashton, Bristol.
National Vegetable Research Station, Wellesbourne, Warwick.
Scottish Horticultura Research Institute Mylnefield, Dundee

In the last case, the figures exclude 1952–53. In all other cases, except the first, the expenditure from 1952 to 1956 is estimated.

Year

Maintenance
Capital
Total




£
£
£


1952–53
…
345,126
84,500
429,626


1953–54
…
436,389
153,600
589,989


1954–55
…
462,623
193,300
655,923


1955–56
…
546,344
172,400
718,744


1956–57
…
680,812
109,096
789,908


1957–58
…
766,113
165,921
932,034


1958–59
…
792,910
174,876
967,786


1959–60
…
910,046
217,175
1,127,221


1960–61
…
1,141,381
148,042
1,289,423


1961–62
…
1,164,555
105,334
1,269,889




7,246,299
1,524,244
8,770,543

TABLE II

EXPENDITURE AT EXPERIMENTAL HORTICULTURAL STATIONS

(including Kirton Experimental Husbandry Farm)


—
Running cost*
Capital Expenditure
Total




£
£
£


1952–53
…
73,487
152,214
225,701


1953–54
…
111,384
59,986
171,370


1954–55
…
135,516
101,309
236,825


1955–56
…
154,920
125,816
280,736


1956–57
…
192,816
109,246
302,062


1957–58
…
220,705
133,749
354,454


1958–59
…
274,470
95,050
369,520


1959–60
…
292,707
40,463
333,170


1960–61
…
313,656
72,944
386,600


1961–62
…
294,550
45,296
339,846


* Includes cost of scientific, technical and office staff, and depreciation on machinery and scientific equipment. Excludes depreciation on buildings, insurance and interest on capital.

Cancer Research

Mr. D. Griffiths: asked the Parliamentary Secretary for Science how much money has been granted to universities and hospitals of the National Health Service purely for cancer research, during the years 1955–56 to the most recent date.

Mr. Denzil Freeth: I would refer the hon. Member to my reply to the hon. Member for Birkenhead (Mr. Collick) on 28th May, 1962, which gave estimates of expenditure from public funds by the Medical Research Council on cancer research for the period 1950–51 to 1961–62.
These figures included grants by the Medical Research Council to universities and hospitals.
Cancer research is also carried out in the universities and medical schools from their general funds as well as in hospitals of the National Health Service, but I regret that it is not possible to make a reliable estimate of the sums involved.

Mr. Griffiths: I thank the Parliamentary Secretary for a very long reply, which means absolutely nothing. Is it not time that he conveyed the news to his chief, the noble Lord, and asked whether we could spend some money on human values instead of wasting hundreds of millions of £s on Blue Streak and further millions of £s on defence abortions?

Mr. Freeth: It is untrue to suggest that greater progress in finding the causes of cancer would necessarily be made by the mere expenditure of money. If money in research is not to be wasted, there must be first-class men with first-class ideas who must then be supported. I do not believe that there are any such projects in this field which are not being supported either by the Medical Research Council or by the voluntary bodies.

Mr. Robert Cooke: Can my hon. Friend tell us how the funds spent out of public money compare with those provided by voluntary organisations?

Mr. Freeth: Not without notice.

Dr. Stross: Is the Parliamentary Secretary aware that while considerable sums are being spent on cancer research by the advanced nations throughout the

world, it is rather a farce that in many parts of the world we still allow excessive examinations by X-ray, and test explosions, which increase the amount of cancer affecting human beings?

Mr. Freeth: Those two questions do not come within the Departmental responsibility of my noble Friend.

Mr. Fletcher: Is the Parliamentary Secretary aware that there will be a certain amount of disappointment at his pronouncement? Will he not take further steps to see that some further drive is induced in this research? Is he satisfied that there is adequate coordination among the various public and private bodies, the hospitals and universities dealing with this subject? Is it not time that some further incentive was given by Government effort?

Mr. Freeth: I assure the hon. Member that the Medical Research Council, for which my noble Friend is responsible, maintains very close contact with the British Empire Cancer Campaign and with the Imperial Cancer Research Fund. Cancer research workers in all parts of the world publish the results of their findings and a very close international co-ordination of this research exists as a result.

Mr. Griffiths: On a point of order. In view of the unsatisfactory nature of the reply, I beg to give notice that I will raise the matter on the Adjournment at the earliest possible moment.

Steam-Generating Heavy Water Reactors

Sir H. Legge-Bourke: asked the Parliamentary Secretary for Science if he will make a progress report on the research and development of steam-generating heavy water reactors.

Mr. Denzil Freeth: The Atomic Energy Authority informs me that the progress of the research and development work in support of the steam-generating heavy water reactor is satisfactory. Reactor physics information is being obtained from zero-energy and sub-critical experiments at Winfrith, and good progress is being made on the relevant materials, particularly on zirconium alloys at the Materials Laboratory, Culcheth, and in industry.

Sir H. Legge-Bourke: Can my hon. Friend say something about the contribution being made by Atomic Energy of Canada Limited which, I understand, is collaborating in this matter?

Mr. Freeth: We are collaborating generally with the Canadians on water reactors. This proposal by the Atomic Energy Authority is very much one of its own "brain childs", if I may so call it.

Prototype Fast Reactor

Sir H. Legge-Bourke: asked the Parliamentary Secretary for Science if he will now add to paragraph 57 of the Eighth Annual Report of the United Kingdom Atomic Energy Authority information regarding the building of a prototype fast reactor.

Mr. Denzil Freeth: I have nothing to add to my Answer to the hon. Member for Barnsley (Mr. Mason) on 5th November, 1962.

Sir H. Legge-Bourke: Has the expectation in paragraph 81 of the Report been fulfilled, namely, that Z.E.B.R.A., the zero energy reactor, would be critical in the second half of this year?

Mr. Freeth: I should like notice of that question; this Question deals with the prototype fast reactor.

Mr. Lee: Is the hon. Gentleman aware that there is great apprehension among employees of the A.E.A., many of them at Risley in my constituency, because they feel that not sufficient of a commercial nature is being done as defence orders contract?

Mr. Freeth: That is a very wide question which I attempted to answer in some degree in reply to an Adjournment debate initiated by my hon. Friend the Member for Kidderminster (Mr. Nabarro) a few weeks ago.

Mr. Woodburn: Can the hon. Gentleman give us any information about how soon he will proceed with the development of the reactor station on a commercial basis?

Mr. Freeth: I cannot give the right hon. Gentleman any information other than is contained in the last Report of the Atomic Energy Authority.

New Research Establishments, Scotland

Mr. Willis: asked the Parliamentary Secretary for Science what steps are taken by his Department to ensure that, where possible, proposed new research units and laboratories are established in Scotland.

Mr. Denzil Freeth: The overriding consideration must be to locate research establishments where they can best do their work. But my noble Friend has asked all research councils wherever possible to bear in mind the Government's policy for the distribution of industry in development districts in locating their work.

Mr. Willis: Is the hon. Gentleman aware that it is very important for Scotland and the North-East and similar areas that new laboratories and new research institutes should be sited in these areas whenever possible? Will he take this seriously to heart and make a genuine endeavour to see that it is done?

Mr. Freeth: One must ask oneself why one wants a research laboratory in a particular place. The aim must be to see that the right people who can do the research are there. It is not necessarily true that the establishment of a laboratory provides very much employment.

Mr. Mitchison: Is not there also the point that research may lead to development, and development may lead to practical application, and that that is more likely to happen in and around the places where the research laboratory is put, and is not that a sufficient argument for having these research laboratories particularly in development districts? I should be glad to hear from the hon. Gentleman that he was doing so.

Mr. Freeth: I do not think that this is necessarily true across the whole field of research, although it may well be true in particular fields. In relation to those the hon. and learned Gentleman may not have noticed that for last year no less than one-seventh of D.S.I.R. expenditure was in Scotland.

Science and Technology, Scotland

Mr. Willis: asked the Parliamentary Secretary for Science what steps have


been taken by the Department of Scientific and Industrial Research during recent months to improve communications between science and management in Scotland; and what additional staff has been recruited for this purpose.

Mr. Denzil Freeth: In consultation with the Scottish Education Department, the Department of Scientific and Industrial Research will train and assist lecturers to be appointed shortly at the Central Technical Institutions in Aberdeen, Dundee, Edinburgh and Paisley and to be charged with improving communications between science and technology. The D.S.I.R. branch office in Edinburgh will be suitably strengthened to provide the necessary supporting services for this interesting development. In addition a member of the D.S.I.R. Industrial Operations Unit has been transferred to the National Engineering Laboratory at East Kilbride.

Mr. Willis: I am sure we are all glad that this recommendation of the Toothill Committee is being put into effect, but can the hon. Gentleman say when this is likely to start?

Mr. Freeth: I understand that the selection board for the first vacancy is to meet tomorrow. The second vacancy is expected to be filled later this month, and the other two early next year.

Scientists (Government Work)

Mr. Frank Allaun: asked the Parliamentary Secretary for Science what steps he is taking to relieve scientists engaged on Government work of unnecessary form-filling arising out of that work.

Mr. Denzil Freeth: If the hon. Member would let me know what forms he has in mind, I will be happy to look into the matter.

Mr. Allaun: Is the Parliamentary Secretary aware that some of our most eminent scientists are having to waste their time on such chores as form-filling to obtain simple standard equipment for their research work?

Mr. Freeth: I think that simple equipment of that nature would probably be provided by the university, and my noble Friend is not responsible for the universities.
As regards the applications for grants made to the research councils, I do not believe that any more form-filling is required than is necessary to vet particular applications.

Mr. Mitchison: Is not the hon. Gentleman aware that this complaint is really rather widespread? Will he ask the Trend Committee to look into it?

Mr. Freeth: I am not sure that this comes within the terms of reference of the Trend Committee.

Mr. Mitchison: The hon. Gentleman should look into it himself.

Mr. Frank Allaun: asked the Parliamentary Secretary for Science what steps he will take to provide sufficient funds to enable scientists engaged on Government work to plan their research for more than 12 months ahead, and to prevent the accumulation of delays caused by financial uncertainty.

Mr. Denzil Freeth: It is not correct that scientists engaged on Government work plan their research for only 12 months ahead. The system of forecast of expenditure recommended by the Plowden Report is already in operation within my noble Friend's area of responsibility and is being widely developed. If the hon. Member has any particular case in mind I will gladly look into it.

Mr. Allaun: But does the Parliamentary Secretary realise that research projects are being endangered because of the time taken to present the case for costly research equipment, and that as a result of this many research workers are going to America because they can obtain equipment more quickly there? It must be very disappointing for such workers to find that they start research in advance of the Americans, and finish up with the Americans.

Mr. Freeth: I think that the hon. Gentleman is cutting across a specific Question later on the Order Paper.

Nature Conservancy, Wales

Mr. Gower: asked the Parliamentary Secretary for Science how much money has been allocated to the work of the Nature Conservancy in Wales to date; and how it has been spent.

Mr. Denzil Freeth: £233,000 between 1953 and the end of the last financial year. Of this, £86,000 is staff cost, £68,000 was spent on acquisition of nature reserves, £26,000 on research, training and special surveys, and studentships, and £32,000 on equipment.

Mr. Gower: Can my hon. Friend say something about the adequacy of these amounts?

Mr. Freeth: One has to consider with the nature reserves the adequacy over the whole of the United Kingdom, but it is a fact that during the period 1953 to March, 1962, nearly 8 per cent. of the expenditure of the Nature Conservancy was spent in Wales, where I understand the population is about 5 per cent. of that of Great Britain.

Mr. Robert Cooke: Will my hon. Friend agree that the amount of public money spent compares most unfavourably with the public interest in this matter?

Mr. Freeth: Yes, indeed, and I hope that if my hon. Friend is successful in the Ballot for Motions on Private Members' days, he will bear this fact in mind.

Scientists and Rocket Technologists

Mr. Mason: asked the Parliamentary Secretary for Science what steps his Department is taking to prevent the loss of trained scientists and rocket technologists from this country to the United States of America as a result of cancelled rocket projects such as Blue Streak and Blue Water; and what success he is achieving in encouraging those who have left to return to Great Britain.

Mr. Denzil Freeth: The hon. Member is under a misapprehension as regards the Blue Streak project.
My noble Friend is confident that industry, which is still short of qualified scientists and engineers, will be quick to avail itself of opportunities arising from adjustments in the defence programme.
As regards the last part of the Question, the special Interviewing Board recruited 43 British scientists and technologists in North America last year for posts in this country.

Mr. Mason: Is the hon. Gentleman aware that that is after much pressure from this side of the House? The Civil Service Commission should do more than that. I am pleased to see that, prior to his Reply, it was reported that they have been brought back. Is it not most frustrating for scientists, technologists, and rocket teams in this country who have been developing Blue Streak and Blue Water that there is no planned development within the civil and military fields for rocketry? These people, having got to a certain stage, are frustrated. The projects are cancelled, and then, because of this frustration, they go to America and Canada to take up appointments there. Is not the hon. Gentleman further aware that the Atomic Energy Authority is going through the same frustrating period? It is being run down, too, and there seems to be no assistance or guidance from his Department, which appears to be in existence in name only. In substance it is a myth.

Mr. Freeth: I think that the hon. Gentleman must ask my right hon. Friend the Minister of Aviation questions about the Blue Streak project and its continuation in connection with the European Launcher Development Organisation. The fact remains that industry in general in this country is still very short of scientists and technologists, and I hope that we shall be able to absorb all those whom the cancellation or adaptation of particular projects make surplus to the needs of their individual firms. I think that it would be wrong for us to decide to undertake a particular line of research solely to keep in this country people who happen to be interested in it.

Farm Buildings (Research)

Mr. Mackie: asked the Parliamentary Secretary for Science what action he has taken following the representations made to him on 19th July by the Farm Buildings Association, on the setting up of a farm buildings research station.

Mr. Denzil Freeth: I am awaiting a further communication, which I understood the hon. Member was going to send me following our discussion on 19th July amplifying the Association's views and


saying whether these have the support of other interested organisations.

Mr. Mackie: I must apologise to the hon. Gentleman for not sending him that information, but I thought that at the time of the meeting he had been given sufficient to chew on for a month or two. Is the hon. Gentleman aware that this body, which he kindly met, is the only one which has carried out serious research into agricultural buildings? Because of the amount of public and private money being spent it is essential that he should take the advice of a body which has studied the matter and not the advice of bodies like the National Farmers' Union and the C.L.A. who, although they have a wide interest in it, have not gone into this matter so closely, as the hon. Gentleman must have appreciated after the meeting in July.

Mr. Freeth: One of the points which arose in July was the extent of the support which the Association of which the hon. Gentleman is a member receives from the other two bodies.

Mr. J. H. Osborn: Is not this something which the Building Research Station might consider?

Mr. Freeth: This would be possible, but one is, after all, dealing with farm buildings designed for specific purposes, and I think that the Agricultural Research Council is doing a lot of good work on this front.

Mr. Mitchison: Ought not the hon. Gentleman to do a bit of Empire building among the pig sties in this matter and really get down to seeing that the research work is done? It is a special business.

Mr. Freeth: We have a Committee under a very eminent chairman, Sir Walter Drummond, specifically to advise the Agricultural Research Council on this subject.

Development Engineers (Training)

Mr. Hannan: asked the Parliamentary Secretary for Science what steps he is taking to improve the training of development engineers.

Mr. Denzil Freeth: The syllabus for training engineers at universities and colleges of advanced technology is not a

matter for which my noble Friend is responsible. The Department of Scientific and Industrial Research makes awards, however, for postgraduate training in engineering to suitably qualified candidates.

Mr. Hannan: But what steps does the hon. Gentleman's department take to draw the attention of his right hon. Friend to this problem? Is he aware that while the standard of scientific research in Britain is very high, as is technical skill in the factories, the difficulty lies in bringing the discovery from the research stage to the factory floor, which requires development engineers, and since there is a shortage of such engineers and they have a lower status, can the hon. Gentleman draw the attention of his right hon. Friend to this?

Mr. Freeth: At the present time the D.S.I.R. has no less than 663 current awards going in engineering and metallurgy, and also 10 post-doctoral awards in engineering. I do not believe that there is any lack of knowledge in universities, C.A.T.S., or industry, of the facilities available.

Mr. J. H. Osborn: Does not my hon. Friend agree that experience after being trained to be an engineer is by far the best way of training a development engineer?

Mr. Freeth: This is obviously a very important factor.

Science and Industry (Consultations)

Mr. Hannan: asked the Parliamentary Secretary for Science what consultative facilities exist between his Department and industry, particularly the older traditional industries in Scotland, for using science to transform their technology and methods of management.

Mr. Denzil Freeth: The Department of Scientific and Industrial Research's research stations and the industrial research association laboratories devote up to 25 per cent. of their effort to technical information and advisory work. Two booklets recently published by D.S.I.R. "Technical Services for Industry" and "Science in your Methods" demonstrate how the Department and research associations are dealing with this problem. All of these facilities are available to Scottish industry,


and I have already described the additional work which the Department is currently undertaking in Scotland in reply to a Question by the hon. Member for Edinburgh, East (Mr. Willis).

Mr. Hannan: Can the Minister say how many inquiries have been made by Scottish employers or industrialists, and what use is made of this surplus? Further, can he say what consideration is being given to the process of producing smokeless fuels from coals other than anthracite fuel, in view of the increasing demand for smokeless fuels, and the closing of Scottish pits?

Mr. Freeth: I would not like to give an answer to the last part of the hon. Member's supplementary question without notice, As for his first point, if he will put down a detailed Question—because such a Question must involve all the institutions to which industry may apply for information—I will do my best to provide him with the information.

Atmospheric Pollution

Mr. W. T. Rodgers: asked the Parliamentary Secretary for Science what research he is conducting into problems of overcoming atmospheric pollution of industrial origin, especially in view of the continued high incidence of bronchitis in this country.

Mr. Denzil Freeth: The Warren Spring Laboratory of the Department of Scientific and Industrial Research and several grant-aided research associations are carrying out research aimed at reducing at source the emission of fumes and products of combustion from industrial plant and furnaces. The Laboratory is also investigating the problem of reducing the concentration of these pollutants at ground level by improved dispersion from chimneys.

Mr. Rodgers: Does not the Parliamentary Secretary agree that, quite apart from the grave risk to health caused by pollution of this sort, the unpleasantness of persistent pollution represents a notable loss of amenities in certain areas? Will he take steps to draw the attention of his right hon. Friend the President of the Board of Trade to the results of this research, with a view to getting industry—and particularly the chemical industry—to

adopt a more active approach to the prevention of pollution?

Mr. Freeth: A great deal of research is being done, and a lot is being done at the express request of the industries themselves.

Dr. Bray: is the Minister aware that although a great deal of research is being done it is mostly into the physics of pollution and not into the chemistry of the atmosphere? Is he further aware that none of the work which is going on on the chemistry of the atmosphere in this country is comparable to the work on atmospheric pollution undertaken in Los Angeles, which identified the cause of smog there?

Mr. Freeth: I will look into that point.

Mr. Woodburn: Is the Minister aware that scientific opinion is that the abolition of smoke may mislead us into thinking that we are getting clean air whereas there is a greater danger in the chemical fumes which remain, but which are not seen in the form of smoke, than there is in the complete pollution of the air, which is visible, so that the danger can be seen?

Mr. Freeth: I accept what the right hon. Gentleman says. In fact, our research is based on that premise.

Research and Development Expenditure (Defence)

Mr. Denis Howell: asked the Parliamentary Secretary for Science what proportions of research and development funds are spent on defence compared with civil science.

Mr. Denzil Freeth: I would ask the hon. Member to await the forthcoming report of the Advisory Council on Scientific Policy, which will contain the latest estimates of total research and development expenditure and will show the proportion devoted to defence.

Mr. Howell: When is this report likely to be available to us?

Mr. Freeth: I hope that it will be early in the New Year.

Mr. Mason: Why has not the Minister got the latest figures available, without waiting for the report? Secondly, reference has been made to the money


spent by the Ministry of Science on civil and military projects. In view of the fact that Blue Streak was cancelled as a military project and is now going ahead as a civil project, can the Minister say to what extent the work is proving successful, and how much money has been spent on it and how many rockets we are developing on the civil side?

Mr. Freeth: The question of Blue Streak, which is being developed in connection with the European Launcher Development Organisation, is a question for my right hon. Friend the Minister of Aviation. As for the first part of the hon. Member's supplementary question, it would be much better to await the full report of the Advisory Council, in order that the figures may be authoritatively commented on.

Mr. Mason: Is not the Minister an authority? Is not he the House of Commons head of this Department? I know that we cannot question the Minister for Science, but when a Question is put down, of which he receives 48 hours' notice, why cannot be give the information? Why should we have to await the report?

Mr. Freeth: The hon. Member will find that it is much more satisfactory if these figures, which I have not got, are properly dissected by the Advisory Council, which exists in part for this purpose.

MINISTER OF DEFENCE (RESPONSIBILITIES)

Mr. K. Lewis: asked the Prime Minister what plans he has for increasing the responsibilities of the Minister of Defence in relation to the other Service Ministries.

The Prime Minister (Mr. Harold Macmillan): The organisation of the defence departments is under constant review, and I would of course inform the House of any decision to make a change.

Mr. Lewis: Is the Prime Minister aware that some of us—and apparently the Estimates Committee—feel that there is a good deal to be said for increasing the co-ordinating powers of the Minister of Defence, so that there can be a pooling of the common services used by the

Navy, Army and Royal Air Force, not excluding headquarters? Is he also aware that we feel that, in view of the pooling of resources that takes place overseas, in N.A.T.O. and other alliances, it would seem reasonable that we should introduce a similar kind of pooling at home?

The Prime Minister: These are very important aspects of a large question, which is not easy to deal with by way of question and answer.

Mr. Shinwell: Does not the right hon. Gentleman agree that this matter has been under constant review for many years—even when he was Minister of Defence? In spite of the talk about co-ordination, is not the Prime Minister aware that this so-called co-ordination is most ineffective? Before the Defence Estimates come before the House early next year, will not he consider giving this matter more careful consideration, so that we may witness more effective coordination and, perhaps, integration, in these three Services?

The Prime Minister: I will take into account what the right hon Gentleman says, because he has great experience in these matters. But there have been successive advances. As to the larger question raised by the right hon. Gentleman, I do not think that he would expect me to make a statement in answer to a supplementary question.

Mr. G. Brown: As we have had 10 Ministers of Defence in the last 11 years, does the Prime Minister think that we can get any co-ordination?

The Prime Minister: I understood that the Question was related to functions rather than to personalities.

INDIA (SECRETARY OF STATE'S VISIT)

Mr. Dalyell: asked the Prime Minister whether he will make a statement on the recent mission to India, with particular reference to the possibility of economic help being supplied from under-utilised resources in Northern Ireland, north-east England, and Scotland.

The Prime Minister: The mission led by my right hon. Friend the Commonwealth Secretary went to India to consider the situation arising out of the


Chinese aggression, and to assess India's military requirements. In considering the question of further economic assistance towards India's third Five-Year Plan we shall certainly keep in mind all relevant factors.

Mr. Dalyell: Does not the Prime Minister agree that the third Five-Year Plan is as great a priority as military aid? Will he consider these unorthodox steps in order to bring immediate help? Is it not clear that many of the products that the third Indian Five-Year Plan needs are manufactured on the North-East Coast, in Northern Ireland and in Scotland?

The Prime Minister: I quite understand the possibilities of this. My right hon. Friend the Chancellor of the Exchequer referred to it in the debate on the Address, in a sentence which I will quote. He said:
I should be inclined to look a little more generously at a request for aid if the products that the people receiving the aid were going to buy were something that we could provide from our existing spare capacity."—[OFFICIAL REPORT, 5th November, 1962; Vol. 666, c. 636.]
That principle will be borne in mind.

Sir C. Osborne: Is not the extra economic aid that we should all like to give to India and the depressed parts of this country conditioned by our ability to export more? Secondly, is not the question of exports one over which no Government, of whatever colour, has any control whatever?

The Prime Minister: The ability to give aid and to keep the balance of payments right depends upon our general exporting position, but the Question is related to another possibility. As hon. Members know, a great deal of the aid programmes us not in terms of free money but is related to certain products manufactured in this country. What is now further proposed is the question whether, in taking account of the necessity to provide more aid, we should have regard to areas where there is spare capacity and bear them in mind. That I undertake to do.

Mr. G. Brown: The Prime Minister will be aware of the fact that, yesterday, the Secretary of State for Commonwealth Relations told us that one of the consequences of the Chinese aggression in

India will be a slowing down of essential Indian economic progress. Will the Prime Minister therefore consider what help we can give, and whether, in giving that help, we can link it up, as my hon. Friend has suggested, with help to our own depressed areas? Would not that be a good thing to do?

The Prime Minister: That is exactly what I have just said.

TRIBUNAL OF INQUIRY

Mr. Hale: asked the Prime Minister if he will move to amend the Resolution of the House of 14th November so as to require the Tribunal to give particular consideration to the circumstances under which confidential information relating to the Vassall case was given by or on behalf of a Minister to a Lobby correspondent accredited to the House: and if he will make a statement.

The Prime Minister: I would refer the hon. Gentleman to the reply which I gave to the hon. Member for Dudley (Mr. Wigg) on 20th November.

Mr. Hale: But is not the right hon. Gentleman aware that this was a detailed and apparently carefully premeditated allegation that secret information relating to the Vassall case had been communicated to a Lobby correspondent who had betrayed the secrecy of the case and published it and had been removed from the Lobby? It was made in a long speech with an incivility unbecoming to the Civil Lord and a loquacity inappropriate to the Silent Service, and the only explanation given subsequently was that perhaps he was mistaken in one or other of his facts. Surely this is a matter for some action by the Government.

The Prime Minister: I thought that this particular matter had been dealt with.

Hon. Members: No.

Mr. Fell: Is my right hon. Friend satisfied that the Tribunal will do nothing to upset the relationships which exist between the Lobby and Members of this House which are based on trust and mutual confidence?

The Prime Minister: Yes, Sir.

Mr. Gordon Walker: Since the right hon. Gentleman, through the terms of reference, instructed the Tribunal to look into certain cases of alleged leakages to the Press, may I ask whether he would take very seriously the point in this Question that other leakages, not embarrassing but helpful to the Government but nevertheless bad, should also be looked into?

The Prime Minister: I do not think that it would be practicable to change the terms of reference of the Tribunal and I am quite confident that Lord Radcliffe will carry out this work in a satisfactory manner.

Mr. Wigg: asked the Prime Minister whether he will offer to give evidence to the Tribunal appointed by Resolution of the House on Wednesday, 14th November, 1962.

The Prime Minister: I am naturally prepared to give evidence to the Tribunal if I am requested to do so.

Mr. Wigg: Does the Prime Minister agree that he has a duty over and above waiting for a summons from the Tribunal? After all, he is certainly covered in the terms of reference, for he has an overall responsibility for security in this country. Surely one of the things which the Tribunal must do is to establish whether the Prime Minister himself has carried out his duties with sufficient competence.

Mr. Speaker: On that assumption it would appear to come within the terms of reference of the Tribunal.

Mr. Wigg: On a point of order. The terms of reference of the Resolution of the House ion 14th November refer in (4) to
any neglect of duty by persons directly or indirectly responsible …"—[OFFICIAL REPORT, 14th November, 1962; Vol. 667, c. 523.]
Surely, here the Prime Minister must himself realise the burden of his responsibility and should be the first to volunteer. Is the Prime Minister aware that only last Thursday I did my best to see that no cost would fall on him or the Conservative Party if he wished to be defended by counsel?

Mr. Speaker: The hon. Member has this wrong. If it be assumed that the Prime Minister is a person directly or

indirectly responsible for the employment of the particular individual and his conduct and so forth, all that would be part of the circumstances of the Vassall case referred to the Tribunal.

Mr. Gordon Walker: Must we not be careful not to take this rule impossibly far? How can it possibly reflect on the Tribunal to suggest that an hon. Member or the Prime Minister should volunteer to give evidence? We are not referring to their being called. This cannot specifically be reflecting upon the Tribunal in any way. It is not dealing with the Tribunal's responsibility. It deals with the Prime Minister's responsibility.

Mr. Speaker: It was for that very reason, as the right hon. Gentleman will understand, that the Question appeared on the Order Paper. It is proper to ask whether a person will volunteer to appear but when it comes to the range of responsibility I think it comes under the rule.

Mr. Wigg: On a point of order. The fact that the Question was on the Order Paper means that it was accepted, and that surely establishes the fact that it is in order for the Prime Minister to answer whether he himself feels that the burden of his responsibility has been such that he must offer to give evidence. Surely the House has the right to know that, because once we can establish that we can seek to get the Resolution amended to bring the Prime Minister within its terms, assuming, of course, that he wants to give evidence.

Mr. Speaker: The view which I take—I think that it strictly follows the Ruling which I gave the other day in general—is that it is perfectly all right to ask someone whether he will volunteer to give evidence, but if the question goes on to say that he ought to volunteer because he has certain responsibilities, then one is embarking upon the field of what has been referred to the Tribunal. That is the distinction.

Mr. Wigg: In that case, Mr. Speaker—[HON. MEMBERS: "Oh."] I can understand why hon. Members opposite want to dodge this. This is, surely, a matter for the Prime Minister. He set the Tribunal up. He laid down the terms of reference. He can amend them. We


are now asking him whether he feels the burden of responsibility so as to offer to give evidence to the Tribunal; and if not, why not?

Mr. Speaker: I understand the point which the hon. Gentleman makes. I have ruled about it. That is the view which I take.

Mr. G. Brown: Mr. Speaker, does not your Ruling cut across the admission of the Question? The Question is admitted, and it asks the Prime Minister, not anyone else but the man who is responsible for the security services, whether he will give evidence. The right hon. Gentleman happens also to be the man who made attacks on some of us.
The Question having been admitted, you now rule, Mr. Speaker, that we may not ask the Prime Minister about his responsibility for the security services. Is not this, in a way, giving us by the admission of a Question one thing and taking it away from us by a later Ruling? Can we possibly be refused the opportunity to question the Prime Minister about evidence which he has to give just because the Tribunal has been set up?

Mr. Speaker: The difficulty is simply this. I cannot quote verbatim the supplementary question asked by the hon. Member for Dudley (Mr. Wigg) which caused me to give a Ruling, but what has been referred to the Tribunal are the circumstances in which offences under the Act were committed by the named individuals—prima facie, that comprises the responsibility of all those concerned with security matters in relation to that case—and the four particularised items which included any neglect of duty by persons directly or indirectly responsible for the employment and conduct of that individual and for his being treated as suitable for employment.
I thought that the hon. Gentleman's supplementary question went straight into that area.

Mr. Gordon Walker: May I ask you to consider this question, Mr. Speaker? Obviously, the sub judice rule is very important but it would, I submit, be wrong to take it too far. Is it not the case that the sub judice rule means not that one may not make references to a tribunal or court but that one must not make improper references? If we take

the rule so far as it seems that you are doing, Mr. Speaker, in this last Ruling, is it not taken so far that we deprive ourselves of rights which we ought to have? Clearly, any improper reference to what the Tribunal ought to do or to the subject matter before it would be wrong, but to extend the rule to the point where one may not make any reference at all to anything in connection with the Tribunal is going further than any court would go in enforcing its own sub judice rule, is it not?

Mr. Speaker: I have not intended to widen in any way the Ruling which I gave the other day. What I think is sub judice, as I have said, is that which, according to the terms of the Resolution, we have referred to the Tribunal. The only problem which thereupon arises is whether or not the particular supplementary question on which I ruled is one which goes into the field of those terms of reference. I will look at it again. I should certainly like to consider the actual words used by the hon. Gentleman because, obviously, one has to work rather fast at Question Time. I did indicate, as the right hon. Member for Smethwick (Mr. Gordon Walker) will remember, that my Ruling the other day would inevitably involve me in having to rule on a number of peripheral matters. The difficulty is increased in this case because the terms of reference to the Tribunal were particularly wide. It is peripheral matter of that kind on which I have ruled.

Mr. M. Foot: If the Prime Minister does volunteer to appear before the Tribunal, will he be represented by the Attorney-General or, if not, by whom?

The Prime Minister: I think that that matter is not really very difficult. I have no doubt whatever that, if Lord Radcliffe feels that I can give any evidence of value to him, he will ask me to do so.

UNEMPLOYMENT, SCOTLAND

Mr. Rankin: asked the Prime Minister if he will instruct the Ministers concerned to devise means of moderating the unemployment situation which has developed in Scotland.

The Prime Minister: The Government are deeply concerned about this. A


great deal has already been done to help. Scotland will of course benefit from the expansionary measures announced by my right hon. Friend the Chancellor of the Exchequer and is receiving substantial help in Local Employment assistance and increasing public investment.

Mr. Rankin: Would the right hon. Gentleman, even by a nod of his head in the proper direction, answer the Question? Will he instruct Ministers, as suggested in the Question, to devise means?

The Prime Minister: I do not quite know what the hon. Member's experience—

Mr. Rankin: rose—

Hon. Members: Sit down.

The Prime Minister: Does the hon. Member for Glasgow, Govan (Mr. Rankin) want to go on?

Several Hon. Members: rose—

Mr. Speaker: Order. We have approached a state of confusion and I should like to hear what the hon. Member for Govan wants to say.

Mr. Rankin: May I direct the attention of the Prime Minister to the words of the Question which ask whether
he will instruct the Ministers concerned to devise means of moderating the unemployment situation which has developed in Scotland"?
Will the right hon. Gentleman answer that?

The Prime Minister: I do not know what the hon. Member means—

Mr. Rankin: rose— —

Hon. Members: Sit down.

Several Hon. Members: rose—

Mr. Speaker: We do not make much progress when a multiplicity of Members are on their feet. The matter would be assisted if the hon. Member for Govan would be good enough either to resume his seat or to stand up.

Mr. Rankin: May I ask the Prime Minister whether he recollects that last Thursday his Government decided to

embark upon a programme of producing new vessels in the air? Would he agree to suggest to the Ministers concerned, to whom I referred, that a programme of producing new merchant and naval vessels at sea might be considered? In order to facilitate that, would the Prime Minister consider the idea of subsidies for scrapping ships and secondly long-term Government backing for credit to overseas customers?

The Prime Minister: I am quite prepared to consider all these proposals.

Mr. Grimond: When considering this matter, may I ask whether the Prime Minister would also consider giving some attention to the possibility of helping areas of heavy unemployment by means of some tax discrimination and possibly by increasing investment allowances? Also when implementing the Rochdale Report on certain ports, could the Prime Minister give a priority to work in ports which themselves serve areas where there is high unemployment?

The Prime Minister: All these matters will be taken into account. Broadly speaking, there are two groups of methods by which the situation can be improved. First, there are those which are general to the economy, that is in increasing the general strength of the economy, which is expansion. That, of course, is limited by our great need not to fall into another danger through the incomes policy not being adjusted to general expansion. Then there are the special interests of special areas such as the building of advance factories, the use of the Local Employment Act, public works, including docks, which the right hon. Gentleman mentioned, and all the other proposals which we have in mind.

ESPIONAGE

Mr. Fletcher: asked the Prime Minister what instructions have been given to Ministers and Junior Ministers about disclosing to the Press or the public matters relating to the extent and nature of espionage.

The Prime Minister: I would refer the hon. Gentleman to the reply which I gave to the hon. Member for Cardiff, South-East (Mr. Callaghan) on 20th November.

Mr. Fletcher: Is the Prime Minister aware that he has not answered the real question, which is: does the Prime Minister agree or not with the statement of the Civil Lord of the Admiralty that there are not a dozen, a hundred but thousands of spies in the embassies, consulates and trade missions, all trained to detect weakness in character—weakness with drink, blondes, drugs, and homosexuality—and that all this is carefully indexed for future use? If the right hon. Gentleman agrees with it, what is he doing about it?

The Prime Minister: We discussed this at some length on Thursday with a right hon. Gentleman opposite and I thought that, though perhaps in language somewhat different from that which I used, he described what I described—a massive attack on our security.

SERVICE DISABILITY PENSIONS

3.35 p.m.

Mr. Leslie Hale: I beg to move,
That leave be given to bring in a Bill to make further provision for rehearing of applications for Service disability pensions, for amending the law in connection with onus of proof and limitation of time in relation to Service disability pensions, and for matters in connection therewith.
During the years when there was a Labour Government we had a great many discussions on what was generally called the "Fit for service, fit for pension" rule. A good many undertakings were given, and we had at that time a surprising amount of support from hon. Members of what was then the Tory Opposition. However, the Royal Wax-rant has for a considerable time contained in two complicated Articles a provision which has been variously interpreted and which has undoubtedly introduced very real hardship.
By Article 4, the Royal Warrant provides that an applicant for a disability pension shall not have the burden of onus of proof so long as the application is made within seven years of termination of the relevant period of service. Article 5, in dealing with claims made after seven years, provides for no such limitation.
The result has been that, where an applicant has delayed making application, often for most honourable reasons—often because he is still able to continue employment and does not want to apply while he is able to continue—it is said, in regard to a whole range of diseases of unknown origin, that he must fail to establish his claim. If, for instance, he is suffering from Parkinson's disease, from disseminated sclerosis, from multiple sclerosis, from muscular dystrophy, from schizophrenia, and so forth, it is said that, because medical science has yet failed to establish the cause of those diseases, the applicant cannot discharge the onus of proof and show conclusively that the cause of the disease was the relevant period of service.
On 14th November last, I raised on the Adjournment the case of Joseph Blakeman, who suffers from schizophrenia. I do not wish to recapitulate


what I then said, but it seems to me that this case is a classic example, for very many reasons. Appropriately enough, the Guardian to-day has an extremely interesting, informative and fascinating article about some aspects of schizophrenia.
I put the case of Blakeman, quite shortly, as an example which strongly supports my argument. Blakeman is a man of complete honour and integrity. As a young man, he sought to train himself for clerical work. He took a secretarial certificate and had established his position as a chartered secretary, subject to one failure in economics, which he hoped to put right. The war came, and he saw service. His was not dishonourable service. He was with the Eighth Army, in one of the two brigades which Field Marshal Montgomery asked to be sent out to reinforce his troops at E1 Alamein. He was with the Eighth Army right through from E1 Alamein to the Italian campaign and the termination of his service came at Padua only after a period which he spent in hospital.
It is true to say that few medical experts would hazard a precise guess as to the absolute predisposing causa sine qua non of schizophrenia. Nobody knows. I made some observations the other day about the worry, misery, fears and apprehensions introduced into Blakeman's family when they were told that the Ministry was pleading that this was a hereditary disorder. Of course, the word "hereditary" has very little significance nowadays. Now that we have the really modern science of genetics, we know that disorders due to genetic causes have little relation necessarily to the health of the parents at all. They may be due to spontaneous seminal mutation or to a failure of mathematical regularity in seminal union. They may not be related to any condition in the parents at all, but may be caused by a curious spontaneous unforeseen reaction at about the time of the conception of the child.
The article in the Guardian deals principally with the subject of psychotomimetics and the effect of some synthetic chemicals upon amino acids and the metabolism of the patient. There is the astonishing statement that I millionth of a gram of a recently produced synthetic chemical can produce psychotomimetic

symptoms of mental disorder. In this state of uncertainty, it is monstrous to try to put the onus of proof of the origin of a disease upon the applicant for a disability pension.
The facts about Blakeman are that in 1943 he went into hospital in Palestine, with meningitis. After being there for some time, he was released, but he went back again with meningitis. Every medical man whom I have consulted about this case says the same. I have talked it over with many. I see that my hon. Friend the Member for Stoke-on-Trent, Central (Dr. Stross) is in his place, and I know that this is his view. Every medical man, on hearing the facts of this case, says "Oh, yes. This is a classic chain of causation. If a person has encephalitis following meningitis, the usual course is meningitis, encephalitis, schizophrenia."
Blakeman was deprived of his pension by a particularly brutal application of the rule. An effort is now being made to deprive him of his unemployment benefit and of his National Health Insurance benefit also, but, as one aspect of that matter is still technically sub judice, I shall have to refer to the matter again when a judgment is given, the terms of which are, I think, inevitable.
Today, I do not wish to be controversial. I raised the question with the previous Minister of Pensions and National Insurance. I mentioned the serious matter of a whole range of diseases being covered by the rule. I was asked to attend for an interview, and I was told there that a further medical report on Blakeman would produce results. I have a medical report, but I have been told by the new Minister that I misunderstood the whole thing, that no one said that at all, but that I had been sent for in order to discuss the matter and all that was said at the actual interview was that, if I got some more information about the hospital in Palestine—which has ceased to exist—I might be able to put the claim again.
I do not blame the Parliamentary Secretary. He comes with a brief, but, on the occasion of my Adjournment debate, with a gallantry which was not unsuspected but with a lack of discretion which was rather surprising, the hon. and gallant Gentleman battened down the hatches, clapped on all sail and


navigated astern—it is possible to sail astern in those circumstances—into waters in which angels usually fear to swim [Laughter.] This is not a case for humour, for laughter; it is a tragic case.
I shall not go on to particularise what may well follow, because I have some concern for the feelings of the men to whom I am relating my case. My proposed Bill is quite simple. I do not believe that, with the Whips off and with a free vote, any hon. Member would disagree with its two quite simple proposals. The first is that the limitation on pensions as it is operated under Articles 4 and 5 of the Royal Warrant shall be applied only if the tribunal believes that justice must be served by applying it, or if it feels that there are reasons in the delay which are to the discredit of the applicant or prevent the Minister from answering. No one has suggested that there is anything wrong or improper in that.
My second proposal is purely declaratory. It is that, in cases of that kind or in any disablement case, the applicant shall have the right to have his case reheard on new or more recent evidence. That is all. I believe that to be the state of the law today. But, of course, unless the House declares that to be the situation, tribunals will continue to feel themselves bound by the decision of the previous tribunal except in exceptional circumstances.
I ask for a declaratory statement of the law to make the matter clear. I ask for a provision which, in equity, has always applied to all pleas of the Statute of Limitations, but which, in equity, no gentleman ever puts forward unless he can support it by reasons to the effect that the limitation was applied for special circumstances and that those circumstances really existed.
That is the application that I humbly submit to the House. I hope that hon. Members will give me leave to present my Bill in order to do justice to some of those who survived the war but did so in circumstances of very real and exacting hardship.

Question put and agreed to.

Bill ordered to be brought in by Mr Leslie Hale, Mr. Fenner Brockway, Mr. Fernyhough, Mr. Dingle Foot, Mr. Michael Foot, Mr. Charles Loughlin, Mr. Charles Mapp, and Mr. Walter Monslow.

SERVICE DISABILITY PENSIONS

Bill to make further provision for rehearing of applications for service disability pensions, for amending the law in connection with onus of proof and limitation of time in relaton to service disability pensions, and for matters in connection therewith, presented accordingly, and read the First time; to be read a Second time upon Monday next and to be printed. [Bill 46.]

Orders of the Day — PROTECTION OF DEPOSITORS BILL

Order for Second Reading read.

3.48 p.m.

The President of the Board of Trade (Mr. F. J. Erroll): I beg to move, That the Bill be now read a Second time.
Recently, I introduced a Bill for the protection of the consumer in the field of weights and measures. Today, I want to speak about another Bill which also has as its objective the protection of the public—in this case, the person who, in response to an advertisement, has deposited same of his savings with a company about which he may know little.
Perhaps this advertisement has been part of an intensive campaign attracting many members of the public with the offer of a particularly high rate of interest. The company may run into difficulties and in the end the depositors may lose their money. All this can happen without the depositor realising that anything is amiss. That is a state of affairs which the Government intend to remedy within the limits of legislation.
I am not, of course, referring to the well-established and trustworthy channels for public saving. I am not referring, for example, to the banks—that is, banks recognised under the Companies Act—to trustee savings banks, to local authorities, nor to building societies and industrial and provident societies. All these bodies are excluded from the Bill.
I am referring to other organisations which invite deposits from the public and use the money to finance hire-purchase and similar credit trading operations or to finance property management and development. Many companies do this which are well organised and which subject themselves to strict controls as to their liquidity and reserves. The Bill will bring no serious inconveniences to such companies, but there is always the chance of a company beginning its career with glowing promises and ending in disaster.
Under the Companies Act, 1948, certain necessary information is given in a

prospectus before the public may be invited to subscribe to shares or debentures; but this does not apply to invitations to deposit of the kind to which I have already referred. Under the Companies Act, also, all public companies are already under an obligation to file their accounts, which are available for inspection by the public for a very small fee at the office of the Registrar of Companies. But these accounts do not have to show all the information which is necessary if one is to form a view of the reliability of a company engaged, for example, in financing hire purchase or property development. Moreover, those accounts can at present, without any breach of the law, be out of date.
Finally, there are some companies which are exempt private companies. This means that they do not have to file any accounts at all. It is obviously wrong that the public should be induced to part with their money with no accounting as to what is being done with it. This Bill, therefore, sets out to remedy these deficiencies.
No legislation can stop companies running into difficulties, nor is it for the Board of Trade to prescribe that a particular form of commercial operation is risky and unsound, or, on the other hand, bold and enterprising and likely to be successful. What the Government must do is to ensure that the information which a depositor ought to have is available, and available early enough to be of use in assessing the prospects or progress of a company. That is what the Bill sets out to do.
I recognise that financial accounts may not mean very much to some of the less experienced members of the public who may be attracted by high-sounding advertisements. But here the financial editors, both of the more serious and of the more popular Press, can render a great service, as, indeed, they already do on the often inadequate information which at present is all that is required by law from deposit-seeking companies. When the Bill is passed they will be able to examine and comment on the more detailed information which will be available, and their readers will be better able to form a view for themselves as to whether they should entrust their money to a particular company or,


having entrusted it to a company, to leave it there.
I have mentioned building societies. Here, there has been a long-standing tradition of close control by the Government in the person of the Registrar of Friendly Societies. This control has been possible because building societies operate within a circumscribed and traditional field. But the companies to which the Bill is directed cover a multifarious field of activity, and the sort of control operated for building societies would be quite inappropriate and extremely difficult to establish in this much wider field. A restriction which might be appropriate for one company operating in a particular field would be quite irrelevant in the case of a company doing something entirely different.
I have given considerable thought to the shape which the Bill ought to take. I am sure that the sensible answer lies in greater and more frequent publicity on lines prescribed by regulations submitted by the Government to the House; provisions to stop misleading advertising; and power, as I shall show later, for the Board of Trade, not to control the operations of these companies but to intervene, if necessary, in certain prescribed circumstances.
I should perhaps mention something else to which the Bill is not intended to apply. Under the wide power of exemption provided in the Bill, it is proposed to exclude advertisements for deposits put out in connection with employee thrift and savings schemes—I am sure that hon. Members would agree with this—or in connection with purchases from departmental stores, or for deposits with clubs or societies, or in connection with church funds, for purposes other than business.

Sir James Duncan: My right hon. Friend has been talking about hire purchase and property development. Does that include apple trees and sows, and things like that?

Mr. Erroll: The Bill will cover schemes of the sort that my hon. Friend has described. I will refer to that matter later.
With the agreement of the House, I propose to explain briefly the contents of the Bill. Starting with Clause 1, the

Prevention of Fraud (Investments) Act makes it an offence to induce persons to acquire securities, such as shares and debentures, if the inducement is fraudulent or reckless. Clause 1 extends this provision to the soliciting of deposits by all kinds of persons, and, as the House will know, companies, partnerships, societies and individuals are all persons within the meaning of the Act.
Clauses 2 and 3 regulate advertisements. The procedure adopted is to establish a general prohibition on advertising and then to except advertisements put out by banks and the other bodies to which I have referred. They will be able to continue to advertise as hitherto. The Bill permits other companies to advertise provided they have complied with the new requirements about filing accounts. The general objective of the Clauses about advertisements is to ensure that advertisements are not misleading—for example, if only partial information is given, such as the company's assets without a statement of liabilities, or if the authorised capital is stated without the paid-up capital being indicated. These are matters which we would not permit in advertising.
It will be unlawful for advertisements to be put out by individuals or unincorporated societies unless the Board of Trade give permission. This is because it is not possible to prescribe the sort of accounts which such persons would have to keep. It therefore follows that it would not be right to permit advertisements by such persons, except, as I have said, with Board of Trade permission.
Turning to Clause 4—

Mr. G. R. Mitchison: Before the right hon. Gentleman deals with Clause 4, could he say in what circumstances the Board of Trade would expect to give permission?

Mr. Erroll: Only when the Board of Trade is wholly satisfied as to the objectives of the persons or the partnership. In general, this provision will be tightly administered.
Clause 4 provides that a private cornpany may invite deposits but only provided it abandons some of the privileges of the private company, and particularly provided it files its accounts. This is an important feature of the Bill because it means that private companies can


remain private but that when they seek deposits in this way they have to shed some of the privileges which appertain to a private company.
Clauses 5 to 12 are somewhat complicated. They contain what I might describe as the accounting provisions of the Bill. No company may advertise for deposits unless it has filed the prescribed accounts and, so long as it does advertise, it must continue to file accounts. The accounts must consist of an audited profit and loss account and an audited balance sheet. In general, they must be delivered within three months of the balance sheet date, so they must be up-to-date. In addition to these audited accounts, there must be six-monthly interim accounts, but those will not have to be audited. These interim accounts will have the advantage of providing more frequent information for depositors without imposing on companies the obligation to call in their auditors twice a year.
If the Bill is accepted by the House, in due course I shall be submitting to the House draft regulations which will prescribe the information which must be given in these accounts additional to that which is already required under the Companies Act. The Economic Secretary to the Treasury, who is to wind up the debate, will be giving more details about the form of account which will be required.
I wish to direct the attention of the House particularly to Clause 11. This Clause makes provision for the furnishing of copies of the accounts to the depositors themselves. A depositor must be given a copy of the latest accounts on making his initial deposit and he can obtain all further accounts on request.
Clauses 15 to 19 deal with the powers of the Board of Trade to ask for papers and documents and to petition for the winding up of a company. This is a development of what the Board of Trade has been able to do in the past. Winding up may prove to be the right recourse when a company is unable to pay its depositors, or can do so only by obtaining additional deposits, or by defaulting on its other obligations, or if its assets are less than its liabilities, or if it fails to deliver or file the prescribed accounts.
This is a wider power than the Board of Trade possesses under the Companies

Act and the provisions in Clause 17 enable the Board to require the production of documents. That, also, is an improvement on what we are able to do at present. It makes it possible—this is an important point—for the Board of Trade to make inquiries without the inhibiting effects of the publicity attendant upon the appointment of an inspector. Such publicity can do harm to a company if, in the event, it is shown to have been in no difficulty.
The Bill deals with one other matter, the point which was made by the intervention of my hon. Friend the Member for South Angus (Sir J. Duncan). During the last two or three years a number of schemes have been put forward, and some have come into operation, which invite persons to become owners of livestock which is managed for them by others. Some of these schemes have failed and have caused distress to those who have put money into them. They are the kind of scheme which the Prevention of Fraud (Investments) Act, 1939, was intended to stop. The Bill extends the operation of that Act to cover these schemes.
The Bill, however, does not cover what I might describe as "casino" enterprises, a matter in which the right hon. Member for Battersea, North (Mr. Jay) has been quite rightly taking an interest. The reason why the Bill does not cover those schemes is that there is no suggestion that casino schemes represent serious investment. On the face of it, they are quite clearly farms of gambling. Indeed, the very name "casino" ought to be sufficient warning to people who participate in them. The criminal law already provides remedies if there is fraud in such cases, but this Bill does not apply to them.

Mr. Douglas Jay: If the fraud is sufficiently outrageous, will not this mean that it will go scot-free under the Bill?

Mr. Erroll: If the fraud is sufficiently outrageous I would expect other action to be taken by way of prosecution. It is not a proper subject for the Bill.
I wish to commend the Bill—

Mr. Mitchison: May I intervene before the right hon. Gentleman leaves the point


about casino companies? These companies have been commented on a good deal in the Press. In one article I read of a company which offered
a chance to participate in the enormous profits made daily by developers of London property.
It offered only 39 per cent. per annum and did not quite rise to the full flights of fancy attained by the casino enterprises, but the same arguments apply here.

Mr. Erroll: If that case is the same as one I have seen—and from the figures of interest rate which the hon. and learned Member has quoted I think that it must be the same scheme—it would be caught by the Bill under the general prohibition of persons and partnerships, because that scheme, if it is the one I have in mind, was a partnership.
I commend the Bill to the House. I am sure that the House will wish to give it a speedy passage and so help towards the further strengthening of the safeguards for the public.

4.6 p.m.

Mr. G. R. Mitchison: This Bill is very belated. Over two and a half years ago one of the right hon. Gentleman's hon. Friends—the hon. Member for Torrington (Mr. P. Browne)—moved the Second Reading of a Bill for much the same purpose as the present one. It was in many ways less complicated, but otherwise it was rather like it.
In HANSARD for 18th March, 1960, the Economic Secretary is reported to have said:
My hon. Friend the Member for Torrington, when he moved the Second Reading of the Bill, said that the need for overhaul is urgent, and I quite agree with him. I hope that the Government will be in a position within a very few months to announce their intentions to Parliament, and I think it is almost certain that the Government will conclude that legislation to deal with this matter should be introduced next Session.
In another part of his speech the Economic Secretary said:
Certainly, we shall press on with all possible speed.
As reported in the following column, he said:
this is not a matter which could be dealt with adequately by a Private Member's Bill."—[OFFICIAL REPORT, 18th March, 1960; Vol. 619, c. 1686–7.]

I have always agreed with that view and no doubt the hon. Member concerned also expected the Government not to wait for two-and-a-half years before doing something which they themselves said was urgent and which they had undertaken to press on with at all possible speed. One does not know what happens when the Government are in no particular hurry—presumably, absolutely nothing. This is a bad case of delay. Most of these fraudulent offers, invitations to deposit, have occurred during the interval between what was then said and now.

The Economic Secretary to the Treasury (Mr. Edward du Cann): indicated dissent.

Mr, Mitchison: I see the Economic Secretary shaking his head. He knows a great deal about this matter. May I correct myself by saying some, at any rate, of these fraudulent offers have occurred in that interval? That is where the Government delay has had its effect.
This is also an insufficient Bill. The particular insufficiency is that it relies all through on accounts and control of a financial kind. Those accounts will by no means always be intelligible or of any real use to the people whose deposits are solicited. Many of these cases will come from comparatively small concerns and they will be addressed to quite small people. They do not understand accounts. For that reason, in other similar matters—the right hon. Gentleman mentioned building societies—we have had to introduce other arrangements in order to secure the public. This Bill may be intended to secure the public, and I certainly accept the right hon. Gentleman's good intentions, but it will not do the job.
As so often happens under this Government, the Bill is half a loaf. They have been careful about adding the rest because they were afraid that that might disturb too many of their friends. This is a matter where the public is entitled to more protection. We shall not vote against the Bill because "half a loaf is better than no bread", but we shall do our best to add a bit more to the loaf when we deal with the Bill in Committee.
I can give the right hon. Gentleman no undertaking whatever about the


speedy passage of the Bill through Committee, because we think that at present it is so inadequate that we must try to get a few more teeth put into it at that stage.
Those are fairly strong words, but we should look at the background. There is a real background to the Bill. The Bill does not touch banks. We are told that banks are defined in the Companies Act. So they are, but when we look at that definition we find that a bank is what the Board of Trade thinks ought to be treated for the purpose of a bank or a discount company, as the case may be. That is not much of a definition; it just leaves it to the Board of Trade. The Board of Trade is reputed to have a secret list—it has never been disclosed—of 100, 120 or 130 banking concerns. I do not know how many there are. I do not know what the Board of Trade calls a bank and what it treats as a bank. What does it think should be treated as a bank?
The other alternative is a discount company. A number of worthy, perfectly honest, people carry on business and call themselves industrial bankers. Are they banks or are they not?

Mr. Erroll: indicated dissent.

Mr. Mitchison: I see the right hon. Gentleman shaking his head, and I am not surprised, but these people took up the name and, when asked by the Ratcliffe Committee to explain it, their explanation, to say the least, was rather confused.
Some of the industrial bankers are called discount companies. One which advertised a short time ago and which, so far as I know, is perfectly reputable, is called the Campbell Discount Company. It was getting money from depositors and using it ultimately in hire-purchase transactions. I need not go through the detail of the matter. What is included? We must be told a little more than that all that is to be excluded is whatever the Board of Trade thinks ought to be excluded.

Mr. Erroll: I know that it is easy to appear flippant about the definition of a bank, but, in practice, the position of the Board of Trade's powers, as described by the hon. and learned

Member, has worked very well, as the Jenkins Committee recognised. I should remind him that the Companies Act was passed in 1948, when the Labour Government were in power. Presumably, they thought it a good definition for a bank.

Mr. Mitchison: No doubt a whole lot of powers have been given to Tory Governments and Labour Governments, but it is not usual to refer to a definition and then to find that it is only what the Board of Trade says it is. As they are to be excluded, I hope that at some stage—preferably in the Bill itself —we shall have a definition of what a bank is. That would be useful. I know it is not easy to do that, but it can be done.
I turn to the history of the matter. One has to go into it. The banks used to get a very high proportion indeed of deposits. If we look at it in relation to the national income in the years immediately before the war, we find that they got about half the national income in the form of deposits. The President of the Board of Trade looks a trifle thoughtful about this. He will find most of the figures in the December issue of the Banker which, although somewhat delayed by the fog, has at last reached me. There was a note about it in The Times this morning. That proportion has gone down to about one-third.
The position is that the ordinary joint stock banks are losing deposits to other institutions and among the most important of those other institutions are the concerns engaged in financing hire purchase. They are one of the groups mentioned by the right hon. Gentleman. The other group mentioned by him was companies concerned with property development. I understand both these groups, but the right hon. Gentleman spoke vaguely of a number of other groups of which he gave no instance except the semi-fraudulent invitations to take a share in a cow or, for that matter, an orange orchard: that was an earlier version of it. We ought to be told during this debate what other institutions the right hon. Gentleman has in mind. I am not talking about definitions, or anything of that sort. I want to know, what is the real mischief supposed to be and by whom and


in what circumstances it is being committed?
There have, of course, been fraudulent cases. What strikes me about them is the extraordinary things that people accept for the purpose of handing in deposits. In some of these casino enterprises, there are, apparently, turnovers of £¼ million or substantial figures of that nature. It surprises me that that should go on. I accept, however, what the right hon. Gentleman said, that most of the people who put in deposits want a gamble and that is their way of doing it. It is a curious way of doing it, looked at in that light, but I let that pass. There will certainly be other people who put up their money with the feeling that in this way, at least, they will get a high return.
Some of the propositions have been remarkable. One concern was to play casino games in accordance with a sound mathematical principle and it believed its system to be absolutely infallible. I seem to have heard those wards before quite often about people who gamble on an absolutely infallible system. I am surprised that a concern like that, offering 260 per cent. tax-free by way of interest, should get anybody to come in, whether anybody was a gambler or an investor. I simply cannot understand it. I can understand people having a bit of money on a horse at the races, or whatever it may be, an their own and one accepts it, but the idea of depositing money with somebody who will then gamble it for him an an absolutely infallible system out of which he will pay about two and a half times the original deposit every year is, to me, unbelievable. There it is, however, and it has worked.
Then there are the people who were offered a chance to participate in the enormous profits made daily by developers of London property. We have heard a lot about These properties in one way and another. No doubt, some large profits are being made. This may not be the moment to defend or to debate them, but they do not usually result in giving 39 per cent. interest in a year on money which is withdrawable at 28 days' notice. I will not go into details. Some of these things are too silly for words when one looks at them afterwards, but the astonishing thing is that they work.
The fact that they did so seems to me to show that the precautions in the Bill are not enough.
There are two Clauses in the Bill concerning fraud, Clauses 1 and 20. Clause 1 extends the provisions of the 1958 Act, which itself was a codifying Measure, from investments to deposits. It does not do much more. It is substantially the same thing. How it came about that all this was applied only to investments and not to deposits is probably a matter of history, because when the legislation originally went through deposits would be joint stock bank deposits and would not call for this type of attention and legislation. If anybody was putting up a fraudulent scheme, he would hitch it on to an investment offer rather than to a deposit offer.
Things have changed, however, and they have changed in the direction of reducing the rôle of the banks and increasing the rôle of the concerns engaged in hire purchase and property development finance. The amendment of the law which is contained in Clause 1 is the only instance in which the 1958 Act happened to get in a little bit about deposits. Generally speaking, it was an investment action. There it is, and I say no more about the fraudulent side of it.
The more serious matter is the insufficiency of provisions about accounts. These are the safeguards on which the Bill relies. I look at other similar legislation, similar in the sense that it is equally designed to protect the small depositor from concerns which have in their operations a distinct element of risk and which may "go bust", as the right hon. Gentleman said, without much warning.
In the great majority of cases, building societies are wholly reputable concerns, but there have been one or two exceptions. In addition, there has been another type of trouble in the building society movement: that is, where a concern—there was a case a few years ago—over-committed itself and did not have sufficient fluidity or liquidity to meet the calls that might reasonably be expected upon it.
What happened in that instance is, perhaps, significant. Financial editors no doubt have their uses, but in this case I am not so sure. One of the daily papers


raised a considerable amount of criticism, some of it, perhaps, well founded, but otherwise not so well founded, and the building society had to be helped out of its difficulties. It emerged from them, everybody was paid and there was no element of fraud or anything of the sort.
The building societies now have to do one or two things to preserve their standing as building societies. Their standing, often referred to as trustee status, comes from Section 1 of the House Purchase and Housing Act, under which the Treasury has power to make regulations about what will entitle a building society to have its shares and deposits treated as investments under the 1961 Act and, further, to have advances from the Minister of Housing and Local Government to help the purchasers of certain types of house.
Those requirements are tolerably simple. They relate to the proportion of liquid assets to deposits and they are intended to preserve a thoroughly liquid state of affairs, sufficient for what is likely in that type of case. I see no reason why there should not be a similar provision in the present Bill, the more so because as regards the hire-purchase companies at least, their evidence before the Radcliffe Committee showed that some of them—the smaller ones—already had something of the sort in their rules.
I shall not go into the matter in detail, but it is obvious that something could be done. If there ought to be exceptions, they can be stated in the Bill. Offhand, however, I see no. reason why people who take deposits from the public should not keep their affairs sufficiently liquid to repay those deposits when called for. In the great majority of cases, those concerned recognise it themselves.
The trouble about the account process is that there are bound to be intervals between the account and the critical moment and that one of these concerns may get into difficulty very quickly. It is not unprecedented that they have been in difficulty. The House will remember that at the time of the Radcliffe Report, only one bank had any interest in these hire-purchase concerns. The evidence given by the hire-purchase concerns was that they did not expect any further developments. Now, how-

ever, the position has changed very much. Eleven of the larger finance houses—concerns engaged in financing hire purchase—gave evidence and the great majority have been taken over, either wholly or a considerable interest in them, by the big banks.
At some period, I suppose, the bankers put their heads together and said, "We will not be able to stop these people getting quite a lot of deposits from the public and using them for hire purchase. They are invading our business to a certain extent and the best way to meet that invasion is to take an active financial interest in what they are doing." Those, I suppose, were their motives, but others may know more about it than I do. What I do know is that as this business has developed, so the banks have taken a considerable interest in it and from their point of view it is now very important.
A few years ago, the extent of the trouble in the finances of hire-purchase concerns was revealed in the losses to which the banks themselves alluded. The ultimate trouble was not so much a matter of investment or money in that form, but the real difficulty which some of them had had in competing with others without making rash transactions with some of the hire purchasers. That is the history, and in those circumstances there is everything to be said for a certain amount of enforced liquidity to ensure that they have a solvent status.
There is one other considerable omission in the Bill, and I refer again to the building society legislation. This was noticed by the Economist in its last number and it seems to me to be perfectly right. In certain circumstances, the Chief Registrar of Friendly Societies is entitled to stop a society from taking more deposits. There is no such provision in the Bill. I consider that there should be. No doubt, the power would have to be exercised by the Board of Trade, but something of the kind ought to be included.
I end with a rather short question that puzzles me a little. What is a deposit? It is clearly not simply money handed over the counter in one form or another. It must be, I assume, money which is placed with an institution and withdrawable at a certain amount of notice.

Mr. Erroll: If the hon. and learned Gentleman looks at Clause 25, he will see what "deposit" means.

Mr. Mitchison: I have seen the definitions. I am not sure they take me very much further. However, I see many hon. Members who are anxious to speak. I feel that I have said enough at this stage of the Bill. This is perhaps a Committee point. I will leave it at that for the moment.
The Bill is late. We did not get a word of apology from the right hon. Gentleman. I do not expect apologies from a Government Department which is only 2½ years late in doing something which it said at the time was urgent. The Bill is insufficient for the very short and simple reason that a good many of the people who ought to be protected by it have not enough understanding of accounts to make a critical examination. It is the final abnegation of the functions of Government when all the Board of Trade can say is, "We cannot do any more, but we hope that the financial editors will do it for us by explaining the accounts to their readers". The Government should do a little better than that.
There are certain obvious things which I believe could be done with principal application to the main groups of deposit-receiving concerns affected—that is to say, the hire purchase and the property developing people. It may very well be that there are other cases which the right hon. Gentleman might take power to except and might wish to except. He has not given us any indication of them except the one—I repeat —semi-fraudulent case of shares in a cow or in an orange grove or whatever it was, about which there has been quite a history. Therefore, I regard the whole Bill as half a loaf. As such I accept it. I hope that we on this side of the House will be able to improve it later. For the moment we shall not divide against it.

4.32 p.m.

Sir Henry d'Avigdor-Goldsmid: The hon. and learned Member for Kettering (Mr. Mitchison) has given what I may describe as a tepid reception to this Measure, but I am very glad to see sitting not too far from him the hon. Member for Gloucester (Mr. Diamond), who, I hope, from his

new-found eminence, will join my hon. Friend the Economic Secretary in putting some guts into the Bill. The trouble about the Bill is that it is an academic one. It needs hon. Members with some experience of the dust of the market place as well as the caution of Government Departments to make it effective. In this connection, I welcome my hon. Friend the Economic Secretary, because I am certain that he has a most valuable contribution to make to the Measure.
What we have to deal with demands financial sophistication. My right hon. Friend the President of the Board of Trade has accepted that it is useless to hope to protect by legislation people who are willing to invest money on the promise of a return of 40 per cent. per annum or more. Such people are incurable by legislation. They can learn only from their mistakes. We should be out of our place in the House if we tried to frame legislation which would protect people from that form of extravagant optimism. If people are extravagantly optimistic, let them have their gambles, but do not let us as a legislature interfere with them.
My particular interest in the Bill arises from the fact that a large number of my constituents lost substantial sums of money some years ago in a fraud of this sort. If the House will bear with me for a short time, I should like to give them the details, because I think that there is a lesson to be learned. This was the case of a local solicitor's clerk, who set up in busines on his own, borrowed £40,000 from a number of friends, did a little hire-purchase business, and lost all his capital in a year. However, he had some optimistic accountants who accepted his own figures on the value of the outstanding debts, and, as a result, he was able to declare a dividend.
This process was continued the next year with a new set of accountants. He changed his accountants every year and by a bit of judicious usury he was able to pay to his friends who had invested money a large return on their investment. He did not regain the capital that his company had lost. He had a very respectable name. He was working not in any big centre of population, but on a provincial basis. All his shareholders were very pleased with him. Every year


he changed his accountants, so the grisly facts never really came to light.
They did not come to light under his management. What happened? An enterprising gentleman from London saw this delightful house with a good name. He bought the shares in it for nothing because they were worth nothing. He bought the controlling shares which this man had for very little. He bought them for a sum of money which he borrowed from the company, so no cash changed hands. He took control of the company. He advertised it very widely all over the country and received a large amount of deposits on which he was advertising that he would pay an interest rate of about 9 per cent. He did not go to the excesses of 40 per cent. He advertised a rate of interest higher than that obtainable at conventional sources, but not so high as to be extreme.
Within the course of the year he got together about £200,000 of deposits, all of which he pocketed. Then, having got the original owner of the company in his employ, he sold him back his shares in the company, which he had never paid for, at a price which added up to £200,000. He pocketed £200,000. The depositors had to whistle for their money.
Would this Bill have caught him? I do not think that it would, because the obligation in the Bill is to produce accounts at certain intervals. The fact about these accounts is that my right hon. Friend the President of the Board of Trade is treating the accountancy profession with almost too much respect. These people are most honourable practitioners in a difficult art, but they have not the gift of divination. They do not have second sight. For a large number of the figures which they produce they rely on directors' valuations or on such internal evidence as they have been able to obtain, but they cannot conceivably verify that a very large number of debts are in fact good debts. If the directors describe them as good debts, they accept them as good debts. In a number of cases this is a very real point.
I do not want my right hon. Friend to think that I am just making a joke about this. With the best will in the world, auditors cannot if they are new to a business produce more than an indication of what is going on. It is only when

they are, as it were, tied to the business and have seen it working for a number of years that they can form a conclusion and insist on notes on the balance sheet to that effect, thus drawing the attention of a very alert reader, but not necessarily the attention of the ordinary man in the street.
In this connection the statement that the financial editors will risk libel actions by making comments on the financial standing of a company which go beyond anything which is said in the accounts is not only illusory, but is a very dangerous illusion. Quite apart from any question of being influenced by advertising—the financial Press now is not at all influenced by the advertising it receives—the invitation to a financial editor to stick his neck out in this way is one which his proprietor will suggest he refuses. I do not think that there is any real safeguard to the public in the actions or otherwise of the financial Press.
What is the basis of this problem? I do not think that it is quite as difficult as the hon. and learned Gentleman made out. First, there is no real difficulty about banks. Banks are the only institutions which are recognised as such by the Commissioners of Inland Revenue. They are a much harder group of people to convince than any other I know of. This is a very reasonable basis. As my right hon. Friend said, it has worked very well. There are a limited number of banks. They know who each other are and any bank will tell one what is a bank and what is not a bank. The industrial bankers as such are also well known. They are in an association which is governed by certain rules. These people can also be verified.
The people the Bill seeks to catch are those who seek deposits for which they offer more attractive rates than either the banks or the established hire-purchase houses. How can they afford to offer these higher rates? It can be only on the basis of their own need, or, secondly, the fact that they are doing business of a more speculative nature than that taken on by the other hire-purchase houses. There is nothing wrong in itself in their doing that, but if people do that they should let their depositors know what they are doing.


This is one of the first things that should go into the Bill. If people seek deposits, they should say what they are for.
Arising from what I have previously said, the Bill should also contain a provision that, if a house changes hands, this should be also made known. There is nothing improper about that, but in soliciting deposits it is not wrong to say, "Under entirely new management". People may either be attracted by that or repelled. I am usually repelled if people say, "Under entirely new management".
I apologise for making what seem to be Committee points, but it is always difficult to approach a Measure of this sort except on that basis. I see present in the House a number of hon. Members with experience of this matter, and I hope that we shall between us persuade those chiefly concerned that if the Bill is to be effeotive it must deal with some of these points which have been made.
In effect, the people who make deposits are not the most sophisticated form of investors. They are largely financially ignorant. They have got loyalty. They feel—I noticed this particularly amongst my friends in my constituency—that having made a deposit in an institution they want to go on supporting that institution. They have a certain pride in it. The case I am thinking of, which hit so many of my constituents, was a case where they felt certain local pride in the organisation. It was advertising all over the place. They were impressed by it. This is not improper, nor is it a bad thing.
We should bear in mind that people who make the deposits are not very sophisticated. They are the most attractive form of depositors or investors to the promoter, because their deposits probably represent their savings and, as long as they are safe, they do not wish to disturb them. Therefore, the people who cater for these deposits must be subject to a real discipline.
I wish that I could think of any discipline stronger than the accounting discipline, but the fact remains that I do not think that balance-sheets should be published until the accountants can give an absolutely unreserved certificate for them. That is a problem, but we must face it. We must also face the

fact that this money is sought for businesses of a semi-speculative nature, and if we are seeking to protect the public we must bring this out. We must not just pretend to do it, and so produce a form of legislation which may simply invite the sort of fraud I have already discussed, and which this Bill, in its present form, does not catch.

4.45 p.m.

Mr. Harold Lever: I heartily endorse the closing words, and much else, spoken by the hon. Baronet the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), because if we pass a Bill which, while purporting to protect depositors does not, in fact, do so, there is clearly a real danger of the future situation being worse than the present one. At the moment, depositors have the satisfaction of knowing that our law on the soliciting of deposits is probably the most lax of any developed industrial country. After the encomiums from the Government Front Bench, the depositor will have the added disadvantage that he will be liable to believe that he is being protected when, assuredly, this Bill does very little to achieve that end.
The heart of the matter was exposed by the hon. Baronet when he said that all the Bill does is to attempt to impose a discipline by accounts. The discipline of accounts as provided in this Measure is inevitably inadequate, but the hon. Member was unable to think of any other method that would help to achieve the object of adequately disciplining those seeking the public's money. That is the heart of the matter, and I respectfully submit—

Mr. F. M. Bennett: The hon. Gentleman would probably agree, on reflection, that there is another discipline in the Bill—control of the form of advertisement, which is one of the most misleading aspects of the whole business; people mis-describing both their business and their capacity. The Bill provides protection from that.

Mr. Lever: I see that the President of the Board of Trade nods his agreement with that statement, but all the Bill does there is to apply the discipline of accounts of advertisements. It does not really apply any kind of discipline to the way in which a business is carried on by


the people who are soliciting the public's money. It merely ensures that those advertising shall keep proper accounts, and make them available to the public—

Mr. F. M. Bennett: I do not agree, and I do not want the hon. Member to accept my silence as consent. I think that if he studies the Bill he will find it much more capacious than that.

Mr. Lever: I have studied the Bill to the maximum of my capacity, and I agree that all it does is to provide an accounting discipline.
The difficulty is to find an alternative discipline, and I submit that the only one available is that provided by the not un-analogous discipline in the Building Societies Act or the Friendly Societies Act, where a registrar is in charge of groups of companies soliciting deposits. That would need a public official to service or discipline all the persons seeking deposits from the public, and nothing else will materially add to the safety of the depositing public.
Even though we will all do our best to improve the Bill in some manner, I think that it is quite impossible, either by Statute or by regulations—even coming from so experienced a body as the companies department of the Board of Trade—adequately to discipline and watch over the activities of companies seeking to borrow money from the public unless we appoint a registrar who will undertake duties similar to those of the registrar who is recognised to be necessary to supervise the activities, and more particularly the borrowing activities, of building societies and friendly societies.
If it is objected that we are proliferating controls, my answer must be that if it is thought necessary and desirable to impose a discipline on friendly societies and on building societies in that way—in my submission, the only effective way—surely we must recognise that the activities of the deposit-soliciting organisations are at least as important as the activities of the friendly societies and the building societies.
As my hon. and learned Friend the Member for Kettering (Mr. Mitchison) pointed out, that was not always so, but, as the article in the Banker pointed out, the activities of these bodies have now become, as it were, parallel to the bank-

ing system, and are quite worthy of a substantial department to supervise them.
If the House thinks that it will noticeably protect the depositing public by the Bill, I must, with respect, submit that it is mistaken; and if hon. Members will look at the tail end of the Bill they will see why they are mistaken. Unfortunately, it is not in the nature of the things to get such protection as this on the cheap, but this Measure states that the estimated cost will not be more than £50,000 a year. We cannot adequately supervise the activities of hundreds, perhaps thousands, of companies, soliciting deposits running into hundreds of millions of pounds a year, at a cost of £50,000 a year. It is not fair to the Board of Trade, or to its companies department, to saddle it with such a job with inadequate legislative power.
It is suggested that we might put in things like liquidity ratios, but it is quite beyond the power of the House, Or of the Board of Trade or its companies department, to specify, either by Statute or regulation, what the liquidity ratios of borrowing companies should be. It would be an intolerable burden to throw on them, and I would rather see nothing in the Bill than throw that burden on the Board of Trade. It would be necessary to decide in each class of company the proper liquidity ratio. If I borrow money on deposit and am due to repay it at seven days' notice, one liquidity ratio is proper.
If I borrow money the greater part of which is not repayable for eighteen months or two years, another liquidity ratio is proper. It is quite unfair to ask the Board of Trade to lay down, or the soliciting companies to obey, a complex system of rules on liquidity that we in this House think appropriate to businesses of which we know little or nothing.
I feel that the hon. Baronet, with all his great experience of City matters, is mistaken in thinking that much would be achieved by attempting to specify the purpose for which the soliciting companies wanted the deposits. The arts and poetry of modern public relations and advertisement are quite adequate to cover almost every activity in a glow of almost religious and poetic colour when deposits are being sought. We are


all familiar with the advertisements now being put our regularly—most of them in the Left-wing publications, strangely enough—on behalf of multi-millionaire organisations to persuade us that the great mainspring of their activities throughout the centuries has been to better the lot of their fellow men, with but a slight accretion of profit to themselves. We could not legislate in regard to such information, nor would it be of much use if we got it.
The fundamental failure of this legislation is also shown by the very words used by the President of the Board of Trade. He says that the people who solicit deposits will now have to provide plenty of material for the financial Press to comment on. He says that the financial Press will have the balance sheets and profit and loss accounts. Here I heartily endorse what the hon. Member for Walsall, South has just said about the value of those balance sheets and profit and loss accounts—incidentally, usually the most significant in many cases. The right hon. Gentleman argues that until this energetic Government came along, with power to protect the depositor, the financial Press, though courageous and alert, was not able to comment on the dubious companies because there were no balance sheet figures or because the companies were exempt as private companies.
All that is changed. The financial Press will have the figures to comment on, but I would point out that the financial Press has freely commented in the past on the absence of any balance sheet at all in those soliciting companies. If comment on that fact has not been effective in protecting the public, how does the right hon. Gentleman think that comment on figures that are provided will help to deter the "sucker" wending his weary way to the insolvent, or about-to-be-insolvent, solicitor of deposits? Time and time again in the past, leading financial newspapers have written feature articles naming companies that were soliciting deposits but had never provided a balance sheet. In future, those newspapers will be able to say that the companies have provided balance sheets, and will comment on the detailed figures in the hope that the comment will deter the public from investing.
It seems to me that the additional protection is illusory, and that the most the right hon. Gentleman can claim to be doing is putting the would-be fraud to a little trouble. In the past, the would-be fraud did not have to bother much, but he will now have to be a little more energetic. What the President of the Board of Trade is doing—perhaps my hon. Friend the Member for Gloucester (Mr. Diamond) will be grateful to him for it—is to put a certain amount of business inevitably in the way of the accountancy profession. But he is not doing anything much for the protection of the public.
I therefore urge the Government to try to widen the cover provided, not to seek to legislate for the impossible, but rather to set up an organisation similar to the well-tried organisations that have adequately disciplined other sections of the financial community which seeks deposits from the uninformed members of the public.
In my submission, it is quite beside the point to lecture people about gambling. Let me say at once that I am neither a Liberal, wishing to leave the speculator to his own devices and the sheep to the shearers, nor am I the bossy, governessy type of person who would go to the other extreme, but I do not think that the Government are entitled to ignore the naivety of many of our fellow citizens. The Government should not deny such protection as can be afforded without seriously inconveniencing in any unreasonable way the lawful activities of other people. It is not enough for the Government to say that they do not care if London is flooded with patently fraudulent invitations to deposit, or that they are not bothered if our citizens are being robbed of large amounts of money by these advertisements.
We expect the Government to provide some kind of restriction on the way these frauds operate. It is not good for a society that we should turn a blind eye to those of our weaker or more naive citizens who are victims on a large scale of such advertisements. I beg the President of the Board of Trade to think again about this. If he is bringing in a Bill to protect the public, he ought to see that the public is protected from frauds which, as we all know, are going


on on a wide scale and about which the Bill does not even purport to do anything on the fallacious ground that the gentlemen whose money is being rolled from them are people who are engaged in some sort of gambling activity, or think that they are.
If the Government curb the fraudulent casino syndicate, they might start thinking intelligently and comprehensively about curbing other types of fraud which have nothing to do with gambling. Although the pig schemes or orange grove schemes are affected, if not curbed, by the Bill, the Bill does not in the least affect soliciting deposits for shares or debentures, and when the Bill is passed it will not be difficult to re-enact nearly all the frauds perpetrated on the public in the past by this sort of scheme simply by a slight mutation of the way in which the public's money is drawn from it. That is not good enough and something better should be provided. If the Government are not prepared to make a comprehensive scheme, at least they Should provide something more thorough than this.
Not unnaturally, the Bill is dependent on delegated legislation. I agree that if this is to be the approach, to some extent the Government must rely on delegated legislation. But it is incredible that if they are to rely on it, we should not have had some regulations before us to show what the Government intend. It is obvious what has happened. My hon. and learned Friend the Member for Kettering (Mr. Mitchison) said that it was two and a half years ago that the protection of investors was promised by the Government, but I believe that he is wrong. My recollection is that it was six years ago that in a speech from the Throne the Government promised protection for investors. To echo words used in a different context, one could hardly call this comparatively little Bill adequate fulfilment of that promise.
The Government have been unfair to the President of the Board of Trade, from whom they obviously demanded the Bill at very short notice. That is made clear by the fact that the right hon. Gentleman made no sort of attempt to outline any regulations. No doubt the hard-worked officials, who will have had this unfair task thrown on them,

will have something for late this evening —when it is too late for us to criticise—which the Economic Secretary will be able to tell us in his winding-up speech, but the right time for these regulations to have been indicated to the House would have been in the opening speech. Presumably, the new security regulations do not, on security grounds, keep from the President of the Board of Trade the regulations which are to be unfolded this evening, presumably in confidence, in the winding-up speech of the junior Minister.
In those circumstances, I cannot vote against the Bill, for it does not do any harm, except that it might mislead the public to believe that it is being protected; but it does not do much good. I do not think that it makes much contribution to the fulfilment of the Government's long overdue promise and the long overdue need for a Bill to provide protection to the investing public against fraud and irresponsible borrowing and soliciting for investment.

5.4 p.m.

Mr. F. M. Bennett: So far, the only valid charge which I have heard levelled against my right hon. Friend' the President of the Board of Trade and his colleagues has been that of unnecessary delay in bringing forward the Bill. The hon. Member for Manchester, Cheetham (Mr. H. Lever) has been both unfair and inaccurate. He was unfair to my right hon. Friend, because my right hon. Friend did not seek to make any excuses for those who were advertising for people to gamble away their money on obviously futile and fraudulent schemes. What he said—and I trust that he will agree with my interpretation—was that the Bill was not the method to deal with this problem, but dealt only with depositors for investments.
The hon. Member himself said that in the Gracious Speech the Government had said that they would aim to protect the solicitation of deposits for investments, so he cannot have it both ways. If we are talking about investments, then we are not talking about gambling, unless the hon. Member believes that casinos, and so on, are investments and not gambling. The Government's proposals do not and could not have been made to cover fraudulent advertisements for gambling. I hope the hon. Member will


now re-read the Bill—I interrupted him twice and he told me that he had read it carefully—and will look again at Clause 3 (1, a), which says:
The Board of Trade may by statutory instrument make regulations—
(a) for prescribing the matters which must or must not be included in any advertisement which is to qualify for exemption under subsection (3) of section 2 and generally for regulating the form of such advertisements.

Mr. H. Lever: I do not know why I should have to plead guilty to inaccuracy or unfairness or to paying inadequate attention to the Bill. I said that the only discipline to be applied to these proposed borrowers was the discipline of accounts, and that is so even under Clause 3, so far as we now know.

Mr. Bennett: If the hon. Member believes that those words deal with accountancy, he and I must continue to differ. They say exactly what the President of the Board of Trade said—that he was taking powers to regulate the form of such advertisements.
The hon. and learned Member for Kettering (Mr. Mitchison) began by criticising the unnecessary delay. I must admit that he may have heard a few muted cheers from this side of the House, because that criticism is fully justified. There is no excuse at all for having waited this long to produce the Bill. A number of my hon. Friends and I have been attempting by Private Members' Bills, by letters, by Questions and by other means within the purview of a Member of Parliament to try to get the matter dealt with much more urgently.
As the hon. and learned Member has criticised the Government for delay, I should add that my hon. Friends and I have not had much support from hon. Members opposite in getting this Bill brought forward. If the hon. and learned Member is to criticise my right hon. Friend for not paying a tribute to those of us who have been trying to get the Bill introduced, I must say that he himself was markedly lagging in not paying us a tribute for being the hon. Members responsible all along for prodding the Government in this direction.
It is only at this late stage that the hon. and learned Gentleman has jumped up and started criticising the Government

for delay. I wish that we could have had his help some time ago.

Mr. J. T. Price: As that claim might go on the record unchallenged, may I challenge it by saying that hon. Members opposite are not the only Members who have been pressing the Government? I have been doing so myself—I can speak only for myself—and I will have something to say later about that aspect of the matter.

Mr. Bennett: The hon. Member may be an exception, but I think that the record will show that what I have said is largely correct. I am perfectly willing to take the hon. Member through all the steps taken by my hon. Friend the Member for Torrington (Mr. P. Browne) and others to introduce a Bill of this kind.

Mr. Mitchison: We were very kindly furnished by the Library with a statement of what had been done about this Bill, and the only Question about it was one by the hon. Member for Torrington (Mr. P. Browne), which appeared one day before the Bill was introduced. No doubt there have been other Questions, but I have found them a little difficult to trace. However, I expect that quite a lot was done, and I should be sorry to interfere too much with the hon. Member for Torquay (Mr. F. M. Bennett) patting himself on the back.

Mr. Bennett: The hon. and learned Member was patting his colleagues on the back rather more than himself in this respect, but, apart from what the Library may have provided for him, if he takes the trouble to look back he will find several Questions, apart from a Private Member's Bill introduced by my hon. Friend the Member for Torrington some time ago and which would have come forward again if the Government had not decided to produce their own Bill. I am prepared to supply the hon. and learned Member with a fuller list than the Library has given him to show him the steps which led to the introduction of the Bill. My purpose in bringing this out is to show that my right hon. Friend has received some unfair criticism—apart from that of the delay which my hon. Friends and I are only too willing to admit having been unnecessary delay.
This is not a comprehensive Measure to deal with every method by which


fraudulent people try to take money away from honest ones for their own uses. As I see it, what we have tried to do here is to produce a Measure to cover a particular form of evil which has arisen in comparatively recent years owing to the credit squeeze and other factors, when companies have produced advertisements offering much higher returns on deposits than were usually obtainable.
There have been two aspects of this evil, and this Bill is intended to deal with them both. First, there is the passively misleading part of the arrangement which is that the company doing this does not publish, or provide potential depositors of investments with any information at all about its background, its assets, or about the use to which it will put the money. If one writes to a company such as this—as I have on many occasions when these advertisements have reached me through the post —and asks for information about the company, not only does one not hear anything, but one does not receive copies of the advertisement. A great silence descends on the company when someone tries to get this information. This is the first aspect of the evil with which the Government, however tardily, are trying to deal.
The other aspect is that of more actively misleading the public by using terms and descriptions about the functions of the company which are not only misleading, but are clearly intended to mislead. When a company uses the word "10 per cent. guaranteed", the word "guaranteed" implies to the ordinary person that it is guaranteed by someone or something to do with something or someone. In fact, it means absolutely nothing at all, because it is not guaranteed by anyone, nor can one know what is guaranteed by whom. I hope that in the regulations which my right hon. Friend is to bring in in due course he will take steps to deal with such advertisements.
Another habit which has crept in is that practised by companies debarred by the Registrar of Names at the Board of Trade from incorporating the word "bank" into their titles before the word "limited". In fact, a company would not get consent so to include the word "bank" unless it had the best of all pos-

sible grounds and the best of all possible backing. Gentlemen who have no experience or repute at all in the banking profession put after the word "limited", "merchant bankers", "agricultural bankers", "advisory bankers"—in fact, there is a whole list of such supposed bankers. To ordinary people the word "bank" is normally associated with the great clearing concerns which handle their money in the ordinary way. The companies to which I have referred put in that misleading statement, and it is intended to be misleading.
In this country the word "bank" has a wholly different connotation from that of almost any other kind of business. It implies something of the older conservatism which is all too often missing. This is a point which we shall take up in Committee, but I hope that the regulations will deal with the people who include such titles in their letter headings and thus clearly mislead the public as to the functions which they intend to carry out. I have given one or two examples, and no doubt my hon. Friends can give many others of this actively misleading feature to which we have become accustomed in recent years, and I hope that my right hon. Friend will make it clear that this is one of the evils which will be dealt with by the Bill.
One point with which I have some sympathy, and on which I intend to press the President of the Board of Trade, is that concerning a company which is required to furnish information under the Bill. I cannot see that there is any power, short of requiring it to wind up, to prevent a company continuing to solicit deposits until and unless the information provided is put forward and proved satisfactory, and I hope that this has not escaped the notice of the Parliamentary draftsmen, because even in a couple of weeks it is possible to make a lot of money out of "suckers". If such a company were allowed to continue to advertise for deposits, it could go into liquidation after about six months, having made a comfortable sum out of the unsuspecting public.
At this point I ought perhaps to declare an interest, although I am not sure of the exact rules about this. I have an intimate family and personal


connection with one of the real merchant bankers who have been established in the City for longer than most. I do not think that it is an interest in the accepted sense of the word, because the institution with which I have the honour to be connected has, as the hon. and learned Gentleman knows, been one of the most active in urging the Government to bring in legislation of this kind because it does not like to see the honoured name of merchant bankers becoming linked with fraudulent concerns.
There are 17 accepting houses in the City of London. They are members of the Accepting Houses Committee, and to put them in the same category as fly-by-night attractors of deposits would be unjust. Certain exceptions have been made for the great clearing banks, and others and I suggest that the Accepting Houses ought to be treated in the same way because any restrictions on them would be wholly unwarranted.
I do not know whether the hon. and learned Gentleman is aware of the fact that the accounts of the Accepting Houses Committee receive much stricter surveillance and control by the Bank of England than practically any other institution, because, as the Bank of England has to discount its bills at prime rates, it is not surprising that the Bank of England wants to make sure that the prime bills it discounts spring from sources which are thoroughly conservative secure and respectable in every way. I therefore ask my right hon. Friend to look into this to see whether there can be this one other exception which I consider to be as valid, if not more so, than some of the other exceptions in the Bill.
I have already referred to the unnecessary delay in bringing forward this Measure, which is not an especially complicated one. I regret this particularly because a number of people who have been parted from their money during the last two years could have been saved their losses. I do not want to exaggerate this, but it is a pity that it happened. However, better late than never, and I am now prepared to work hard towards a constructive future for this Measure.
There is one reservation which we ought to have in our minds. We cannot prevent a fool being parted from his money, and, however hard parliamentary draftsmen try, it will never be possible to stop people investing in things which they consider will pay better returns than ordinary investments. Nelson's column, I am told, is still sold to investors about five times a year. No matter how hard we try, I do not think that we can bring that kind of transaction into this Bill.
But we have to make sure of two considerations which I regard as of overwhelming importance in the financial life of this country. First, if people advertise for money, in the same way as someone who sells shares must do, they must provide opportunities for the person investing to obtain all the information that he wants, and not have him put off because the information is not available, or because the company can refuse to provide it. I am aware that many people do not need all this information, but we should make sure that every adult in this country has an opportunity of obtaining such information as he reasonably requires from whatever firm, or individual, or partnership, that is trying to get his money from him. This should be one of the overriding considerations of this Measure.
The second consideration is that just as people should have a right to get such information to enable them to make an investment, so they should be able to think it over carefully and not be actively misled into thinking that they are investing in one kind of concern when, in fact, they are investing in another.
I have already mentioned the use of the word "bankers", and other words which are deliberately designed to convey the fact that people who invest in these concerns are putting their money into something which is as safe as a bank when, in fact, they are not. Therefore, not only in respect of the use of misleading terms, but generally, we should make sure not only that all relevant information is available, but also that those who advertise for deposits make it quite clear for what purpose they are advertising. If the advertisement concerns a crazy, crack-pot scheme,


this should be made apparent, or, at any rate, the advertisement should not indicate that the venture is to the contrary a solid. conservative one, thus being obviously misleading.

5.20 p.m.

Mr. J. T. Price: The President of the Board of Trade introduced the Bill with a remarkable economy of language, judged even by his own standards, which are conservative in the use of words. Normally, I would have felt inclined to compliment any Minister of the Crown who was economical] in the use of words, because on occasions Ministers have made speeches of great prolixity and loquacity without telling us very much. I am not complaining that the right hon. Gentleman did not tell us very much, or even refer to the merits of the Bill. I make this comment because there was probably a very good reason why he did not spend much time either on the context of the Bill or its antecedent 'history.
I want to refer to the real genesis of the Bill. The President of the Board of Trade is a northern Member, like myself, and he will no doubt know very quickly what I am getting at. The hon. Member for Torquay (Mr. F. M. Bennett) should not cast even mild aspersions across the Floor of the House about the lack of vigilance of hon. Members on this side in these matters, because as long ago as 1956 I took the opportunity of having a long conversation with the then Chancellor of the Exchequer on just such a point.
The House will recollect that in 1956 the Chancellor of the Exchequer was the right hon. Gentleman who is now the Prime Minister. While he was Chancellor I took the opportunity of having an amicable discussion with him about one of the most audacious frauds and scandalous rackets—directed from the City of Manchester—that I have heard in the whole financial racketeering history of this country. It would have been of great interest to the House if the right hon. Gentleman, in introducing the Bill, had had the frankness to tell us that it really flowed from the tremendous scandal that arose in connection with the MIAS Group, in Manchester.
The term "MIAS" stood for "Manchester Investments, Albert Square". The

significance of that, from an investment point of view, is that Manchester Town Hall stands in Albert Square—foursquare with the statue of Price Albert, standing there for so long under his canopy and very often in great need of cleaning, because pigeons are very fond of that spot.
When I took the opportunity of drawing the then Chancellor's attention to what was going on in Manchester he was very interested. In that year we had the Suez crisis, out of which the Chancelor was translated to higher regions, and became Prime Minister a year after.

Mr. Deputy-Speaker (Sir William Anstruther-Gray): I do not want to interrupt the hon. Member, but he is getting rather a long way from the Bill.

Mr. Price: I am sorry if I have transgressed the rules of order, Mr. Deputy Speaker. I will get right back on the line now. I hope that I did not go far from it.
As I was saying, I drew the personal attention of the then Chancellor to an audacious financial racket which was being managed and directed from Manchester. A few days after I handed the Chancellor a large collection of advertisements which I had taken the trouble to cut out from provincial newspapers in remote towns all over Great Britain, many of which had been sent to me by people interested in the matter. He thanked me courteously, and said that he would have inquiries made.
A few days later, while I was sitting in the Chamber, he was good enough to cross the Floor of the House and thank me for what I had done in the public interest. He said that the security people at the Treasury had been given the job of making inquiries and had already discovered that the people running this concern were men of straw, who were not able to carry out their obligations.
It is very significant that although I drew the matter to the right hon. Gentleman's attention in 1956, the MIAS racket in Manchester continued unchecked until 1960, when the principals, Mr. Louis Granville Gordon and his associates in Manchester, were arrested and put on trial. At the trial it was revealed that the total of money collected from small investors by


spurious advertisements of all kinds was about £750,000—although I do not believe that the accountants ever discovered the final figures. Of that sum, no less than £339,000 had been filched from the public in the period of eleven months immediately prior to the prosecution being undertaken.
Hon. Members have complained about the delay that has gone on for two years. I am complaining of delay—and supporting it with the history of the case —not for two years but for at least six years, during which hundreds and thousands of small investors were mulcted of money they could ill afford to lose. I am prepared to agree with the hon. Member for Torquay that we cannot entirely protect the public. An old English proverb states that a fool and his money are soon parted. Fortunately, some wise men are not exposed to this risk; they have no money, and are not exposed to the risk of parturition to which he refers.
Some Members of the House, including Ministers when replying to Questions on the MIAS Group, at the time when the matter was boiling up for the bubble to burst—if that is a correct metaphor —thought that the idea of introducing legislation to protect people against the results of their own folly was a kind of paternalism which the House ought not to undertake. But many of our commercial and criminal statutes are concerned with protecting our people against their own folly. I realise that there may be a limit to the lengths to which we can go to try to prevent people from suffering from the conesquences of their own folly, but in financial transactions, with the tremendous growth of advertising and mass suggestion, by television, radio, the Press and everything else, by which the public is constantly being brainwashed, they are exposed to an even greater risk than was the previous generation, which did not have these forces of publicity directed upon it.
Therefore, in a limited sense and with due reservation, I naturally welcome the Bill with all its imperfections to which attention has been drawn. The MIAS scandal was the real genesis of the Bill which has been in gestation from those days. I do not know why it has been pigeon-holed for four or five years. On

4th April, 1960, now about two and a half years ago, the principal criminals, as I think it right to call them, were taken to the Central Criminal Court and the case was heard by Mr. Justice Aarvold. The principal operator was sent down for eight years and his associates for lesser sentences. The judge said in sentencing them that these were the most brazen, most pitiless and most callous frauds ever brought to his notice.
These frauds went on for years. The Government knew about them and did nothing about them, apparently believing that there was no legislative machinery available and that the law of libel protected the criminals against exposure. Even my hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever), who is often punctiliously accurate in his facts, was not accurate about one thing. He said that the financial Press was powerless to do anything about these cases of fraud. The papers would not "chance their arm" because of the law of libel. It is quite true that the law of libel was changed considerably a few years ago, and I am not sure that it was not changed after the cases to which I have been referring.
Nevertheless it is true, and it is only fair to the financial Press to say so, that when the MIAS scandal was coming to light the Investors' Chronicle, which I do not normally read and in which I have no interest whatever, was publishing the most courageous articles from July, 1957, on this kind of thing. One was called, "Curious Expansion of Manchester Group", another was called "Asking for Money" and was published in February, 1958. An article entitled "More Unsecured Depositors" was published in May, 1958. One, which was perhaps the most outspoken of all and really did trail its coat and invite prosecution for libel, was called "Pious MIAS", published in September, 1958. The President of the Board of Trade knows this. He is nodding like an Indian mystic.

Mr. H. Lever: I did not say that the Press was powerless to protect the public because of the laws of libel which, as my hon. Friend has pointed out, were greatly liberalised a few years ago by a Private Member's Bill. What I said was not that they were powerless


to protect because of the laws of libel, but than if their comments—and I had this article very much in mind—that there are no accounts available of people seeking to borrow money do not deter people from lending money, what comments upon accounts will achieve protection of the public?

Mr. Price: I am obliged to my hon. Friend. I do not go as far as my hon. Friend in saying that the Bill is completely useless and does not do the things which it sets out to do. I do not take a cynical view of the case. I admit and I concede to the Minister, and those who support him with their names on the Bill, that if this sort of legislation, with all its imperfections had been on the Statute Book the MIAS frauds could not have occurred, because the advertisements could not have been worded in the way they were.
These MIAS frauds were not only conducted by large-scale advertising in remote country districts, where old ladies and possibly young ladies and gentlemen who had money to invest read them. That was one net that was spread. But the most audacious net spread was on every bus owned by the Manchester Corporation.

Mr. H. Lever: And in the Guardian.

Mr. Price: Yes, the Guardian was also carrying the advertisements. I do not know whether it was ever paid for them. I think that when the crash came the unsecured creditors included those with whom the advertisements were published, as well as the depositors. A very careful place was chosen for these advertisements on the buses. These people did not put long streamers on the sides of the buses, like the football pool firms do. The advertisement was on the back of the last seat of the upper deck of the bus as one went upstairs and similarly there was an advertisement downstairs. It struck the viewer right in the eye.
The MIAS people used a very original gimmick. When I see crime stories on television I often think that television puts a lot of ideas into the minds of criminals who operate for profit in London and elsewhere. In this case, these people had a very ingenious gimmick. They did not believe in any round

figure for the rate of interest in advertising these companies. They advertised a very odd rate of interest. They would pay 12⅝ per cent. to all depositors with full security. We know that 12½ per cent. is half-a-crown in the £, but 12⅝ per cent. is 30.3d. in the £. The Bill, to a limited extent, will put a curb on the advertising for public money and is, therefore, to be welcomed, but I hope that the Committee will improve the Bill as it gets a proper examination.
I should like to say a few words about the implications of the Bill and about things which are matters of public policy. This company which collapsed, and which I have spent some time describing, has had many imitators since. The country has seen an enormous expansion in industrial or merchant banks. I would be the first to admit that many old-established merchant banks with famous names are as reputable and honourable as the joint stock banks with which we are all familiar. But there are a great many others in between and many institutions which call themselves banks which would find it very difficult to justify that label.
I draw the attention of the President of the Board of Trade to the fact that if he were out of office and not thinking of going into the City like other retired Ministers of the Crown and he was looking for a suitable avenue in which he could employ his great talents, he could come to me or some other hon. Member he happened to know and say, "Now Tom, or Joe, what about you and I going into partnership and starting an industrial bank?" There is nothing to stop his going to a brass founders and getting a brass plate with his name and those of his partners on it and sticking up the plate on a suitable block of offices with a very high sounding title for the bank and setting up in business. [Interruption.] I am surprised that my hon. Friend the Member for Cheetham is so touchy.

Mr. H. Lever: Why should there be any obstacle to the Minister doing this?

Mr. Price: I will give way to my Friend in a moment, if he wants me to. The answer is quite simple. If the right hon. Gentleman were, instead of setting up an industrial bank, seeking to set himself up as an insurance company, a


parallel financial institution often performing similar functions, he would need to deposit with the President of the Board of Trade about £20,000—that is what it used to be, I think—for every item of business whether industrial, fire, accident, and so on, and he could not carry on without doing so, according to the law.

Mr. H. Lever: I asked why the right hon. Gentleman should be put under a restriction if, after we have duly removed him from his present office, he wants to be an industrial banker. It is no answer to say that, if he wanted to be an insurance company, he would have to do something else, or, if he wanted to be a doctor or a pork butcher, he would have to be registered or take out some sort of licence. Why should we restrict a perfectly reputable person like the right hon. Gentleman, who wished to earn an honourable living, as I am sure he would. from describing himself as an industrial banker, if he were so minded?

Mr. Price: I have given my answer. If my hon. Friend does not accept it, that is a matter for him. It is good enough for me and seems perfectly logical. He must not try to trap me with debating points like that. This is the House of Commons, not the Oxford Union.
I distinguish the banks and insurance companies, and I say quite seriously, not wishing to be flippant or evasive, that it is time the House took action to stop the misuse of the word "bank", because it connects in the public mind with a quite different institution. Many of these banks are sound and I do not wish to be unfair to them, but today we are faced with a situation in which, with the great building developments which are taking place, we rely very much on the building societies to provide financial backing for owner-occupiers.
The building societies say that they cannot produce enough money to meet all the requests they receive for mortgage advances. Why not? The reason is that many of these so-called marginal banks, the industrial banks, offer fancy and inflated rates of interest to the public. There are still more famous well known companies advertising in the Press a return of 8 per cent. or 9 per cent. with full security, as the Economic Secretary knows very well. How can a building society

raise money at 31 per cent. to satisfy the basic housing needs of a community in such circumstances?
People who borrow money at 8 per cent, could go to the banks to borrow at 6 per cent. But they borrow money at these high rates for a specific purpose. The money which is borrowed at these high rates is being farmed out immediately at much higher rates than those paid to the lenders. I have taken the trouble to look into the hire-purchase market in all sorts of ways. I have not done so from a professional or commercial point of view—I have no such interest in the matter—but I have done it as a Member of Parliament who wants to know what is going on in society.
The hire-purchase terms advertised in the windows of many shops look very attractive. The rates of interest look reasonable enough for being allowed two years in which to pay, but, as the Economic Secretary knows—he can check this for himself, if he has got the actuarial knowledge, or he can get the tables and work it out—many hire-purchase transactions entail interest at 25 per cent. or even as much as 40 per cent. per annum on the outstanding diminishing balance of the loan. The fantastic rates which are being charged in hire-purchase transactions are a national scandal, but the Government do nothing about it because the advertisements are couched in such fine language that the real terms do not appear to be anything like that.
This is the driving force which has produced all these rather spurious industrial banks which are prepared to borrow the public's money at high rates of interest and feed it back into the hire-purchase market at fantastic rates of interest. Under the Moneylenders Act, the ordinary moneylender making money available on loan without security is not able to charge more than 22½ per cent., which is high enough in all conscience. Is not that right?

Mr. H. Lever: Wrong.

Mr. Price: I stand corrected. However, irrespective of the Moneylenders Act—[An HON. MEMBER: "49 per Cent."]—if anybody is allowed to charge as much as 49 per cent. per annum, as I hear someone saying, then this practice


ought to be condemned by the House of Commons and stopped by legislation.
I say seriously, having waited for the opportunity of this debate to say it, that, so long as we have a hire-purchase system so free of control over the rates of interest which are charged to people who wish to buy consumer goods, we shall always have institutions to provide the funds by raising deposits from the general public at high rates of interest and conflicting with the activities and functions of the building societies at many points.
I hope that the Bill will not be accepted by hon. Members on either side as necessarily a useless one. I do not consider that it is a useless Bill. I believe there ought to be brakes on the kind of advertising which has been going on. It does no credit to those who have been running the advertising professionally or to the House of Commons which has allowed matters to proceed unchecked for all these years during which hundreds of thousands of people have lost millions of pounds by pouring their savings into bucket shops because they did not have the sense to realise that a rate of interest far higher than the market rate meant that the risk of insecurity was that much greater and it was something about which they ought to be properly advised.
I hope that the President of the Board of Trade and his colleagues will ensure that the Bill will be improved in Committee to tighten up on advertising and to tighten up on maximum rates of interest which can be paid. Also, as a final point, to give satisfaction to my hon. Friend the Member for Cheetham, who has been rather tedious, as he can be on the odd occasions when he comes here—I see that he is sitting on the Liberal bench, too—I suggest that we might accept his suggestion that the mere putting in of accounts to be checked may not go as far as it should. I suggest that, if these operators who want to borrow the money from private depositors had to publish an audited balance sheet just as they would if they were raising equity for a new company, that would be some safeguard for people who can still read what is published in the Press.
I should not have opposed the Bill. I welcome it with some reservations, but I hope that it can be made a much better Bill than it is now.

5.49 p.m.

Mr. Donald Box: My hon. Friend the Member for Torquay (Mr. F. M. Bennett) told us of the number of times Nelson's column is sold each year. At one point, I thought that the hon. Member for Westhoughton (Mr. J. T. Price) would try to sell us the Suez Canal. I was particularly interested in what the hon. Gentleman had to say about the activities of the MIAS Group because, although I was not in the House at the time, I saw a good deal of the deplorable material which it was allowed to circulate.
Like other hon. Members who have spoken, I give a qualified welcome to the Bill. Equally, like other hon. Members, I deplore what seems to be the unnecessary delay in bringing this legislation before the House. We have heard a good deal about the part played by back benchers on both sides in bringing legislation forward, but the extraordinary feature is that it was not even foreshadowed in Her Majesty's Gracious Speech three or four weeks ago, yet we now have it suddenly presented with an air of urgency.
I welcome the Bill, but, reflecting on the hundreds and thousands of pounds which have been lost by investors in the MIAS Group, in the livestock business and, more recently, in the casino enterprise companies, I am forced to the conclusion that this legislation is both too little and too late. One is tempted to use the metaphor about closing the stable door after the horse has bolted, but that would be inappropriate in this case because the stable door is not bolted but is still very much ajar.
I never had quite so much sympathy with hon. Members opposite who sit on what I may call the independent Socialist bench and invariably engage in a long debate about the length of the Summer Recess as I had at the beginning of the last Summer Recess. Immediately I returned to my constituency, I found there an absolute rash of casino enterprise advertisements in and around Cardiff, and I subsequently learned that a similar sort of thing was going on all over the country. I at once wrote to the Home Office about it, and I informed the police and the Press of the situation. It appeared that the


police already had the matter under examination. Unfortunately, presumably on that account, the Home Office could not be of very much help.
I found in almost every case that the national daily newspapers had large files on the activities of these people but they were afraid to mention the facts because they feared actions for libel. It almost seemed as though the promoters of casino enterprises had deliberately chosen this opportunity when Parliament was in recess to accelerate their activities. Subsequently, their activities became even more prominent and they engaged in something of a poster war, one company over-pasting the advertisements of another. Yet, apparently, no action by the police was possible.
We are now considering legislation to provide protection for depositors. The Bill includes a Clause transferred from the Prevention of Frauds (Investments) Act, 1958, which deals with people who make fraudulent or reckless appeals for deposits. If ever there were a law which one would expect to trap the promoters of casino enterprises, one would suppose it to be the Prevention of Frauds (Investments) Act, 1958, but, apparently, it did not prove effective, mainly, I understand, because of a decision of the Lord Chief Justice on an appeal heard in the High Court.
From a reference to the Bill and to the explanation given by my right hon. Friend, it seems that no action is to be possible against the promoters of casino enterprises in the future.
One is forced to the conclusion that this is rather flabby legislation without sufficient teeth to fasten on those unscrupulous and dishonest people who trap the unwary into parting with their money. Although the Bill requires that audited balance sheets and audited six-monthly reports should be submitted to the Board of Trade before advertising is possible, no yardstick is to be applied to what has to appear in those balance sheets before an advertisement can be published. Another weakness is that depositors are entitled to a balance sheet only after they have made their first deposit. I suggest that it is more important that they see a balance sheet before they make their deposit, although I admit that there are difficulties in making sure

that a depositor sees a balance sheet before he parts with his money.

Mr. Alan Hopkins: Would not he then, upon getting the balance sheet, be at liberty to withdraw has deposit and thereby protect himself?

Mr. Box: Yes, but I think that my hon. Friend is being a little naïve, because, as anyone who has had any dealings with these people knows, once a person has deposited his money it is difficult to get it back again.
I do not underestimate the difficulties of controlling these people, but surely it is not beyond the ingenuity of Government draftsmen to frame minimum standards which should be conformed with before these people are able to advertise in this way. We are reminded that the Committee of the Stock Exchange, the Registrar of Friendly Societies and the Chairman of the Industrial Bankers Association demand the minimum standards from their members before they are allowed to ask for deposits. One thing which is certain is that the reputable people in business would welcome a tightening up of the regulations because it would improve their chances of doing legitimate business. Unless we lay down some standards, it will be the old story of rigid regulations for people most likely to behave in a responsible manner and complete freedom for those of a dubious character.
May I take the most recent example, that of the casino enterprise company about which we have heard a good deal this afternoon. It appears from a reply given to me by my hon. Friend the Minister of State, Board of Trade, that no prosecutions are possible against these people. One company alone is reputed to have got away with £¼ million of investor's money. In addition, it will be outside this Bill. That seems to me tantamount to an invitation to these people to open up again in a different form. If they do that, my right hon. Friend will have to be careful, otherwise they might put "Approved by the Board of Trade" on the bottom of their advertisements.
If this is not the appropriate law to catch people like the casino enterprise promoters, what law will catch them? People who gamble money


must be prepared to lose it, but the law has a very real duty to protect gullible people and certainly to protect people against the activities of dishonest characters. Obviously, we cannot and do not want to control all forms of gambling, but we must try to ensure that even the gambler has a chance to win if he gambles his money. It is bad enough when it happens in the case of one or two people, but when it happens on a wholesale scale, as it has in recent months, we look to the Government for protection.
In the absence of legislation, we have heard that the financial Press and the general Press have a big part to play in exposing the activities of these people. I agree that this has been done on a wide scale in the past and there is no doubt that the Press has carried out a very useful function. But even Press publicity can have a peculiar effect. It can sometimes boomerang. About two years ago a Sunday newspaper exposed a gentleman who was offering lucky charms which were intended to improve one's health, wealth and strength, and to ensure high majorities for politicians. About three or four weeks ago he wrote to the same newspaper urgently asking whether it would mind exposing him again as business had fallen off; it had never been as good as it had been at the time when he was exposed two years before.
This shows how brazen these people are. It is confirmed by the cheeky circulars sent by these people even to hon. Members on both sides from time to time. This illustrates how necessary it is to protect investors, particularly small investors, against the activities of these people. I am not particularly concerned about the large investor, who is able to look after himself. He has his banker, broker, accountant and solicitor to help him. If he is foolish enough to invest in one of these schemes he is well able to look after himself. It is the small investor, whether man or woman, the pensioner and the person living on a small fixed income, who deserve help. They are easily dazzled by high rates of interest; and who can blame them, especially if they want to supplement a meagre income? They can write to a newspaper and ask about the merits of

the investment, but they do this all too infrequently and after they have parted with their money. The small investor has a right to expect protection from the Government in this regard. I regret to say that I do not think that the Bill gives it, and I therefore hope that it will he improved and strengthened in Committee.

6.1 p.m.

Mr. Alan Hopkins: Listening to my hon. Friend the Member for Cardiff, North (Mr. Box), I could not help feeling that possibly he would support legislation to ensure that advertisements to prevent the loss of hair were carefully considered and that such advertisements might be of interest to the hon. Member for Gloucester (Mr. Diamond) and one or two hon. Members who have spoken.
I am virtually the only hon. Member of those Members who have so far spoken who is entirely in favour of the Bill as it stands. Since my hon. Friend the Member for Torrington (Mr. P. Browne) produced a Private Member's Bill just over two years ago, there has been a great deal of public interest in this matter. Since then, I have received many letters from investors—depositors, as they should be called—who have lost in some cases all, but in most cases at least a fraction, of the money that they have deposited. There is, however, no doubt that public attention has achieved a most worth-while objective, and that is that my right hon. Friend the President of the Board of Trade has brought forward this Bill. I assume, although I am not clairvoyant, that it was not entirely the MIAS scandal which persuaded him to bring it forward.
It seems to me that there are two ways, of offering protection to depositors. The first is that chosen by my right hon. Friend in this Bill, namely, to ensure that members of the public are afforded information on which to form their own judgment about whether a deposit is. reasonable or not and, at the same time, to issue regulations about the method of advertising for such deposits. Like the hon. Member far Manchester, Cheetham (Mr. H. Lever), I wish that the regulations were before us now. It would be of great value to know what they will contain, for in them surely lie the teeth of the Bill. If they are sensible, reasonable


and strong, the Bill will be sensible, reasonable and strong, but not otherwise.
The alternative method of dealing with this matter would be to establish a Government agency, whether it be under or connected with the Board of Trade, which would have a supervisory power to exercise its discretion in determining whether an advertisement could be made, this supervisory judgment to be made on the basis of the facts submitted by the company. This system is in existence in America, and it works there. A great deal of evidence on it was given to the Jenkins Committee, which I appreciate is not within the purview of this Bill and therefore I would be out of order in referring to it.
My right hon. Friend's choice seems to me to be the more sensible one in that, if a substantial Government agency were set up to deal with these matters, that would be time consuming. It would be at least, I should have thought, three years before the Bill could be operative, and I believe that the sooner the Bill becomes law and is in operation—the question of whether it is amended in Committee to make it stronger is irrelevant—the better.
I should like to make three points. The first is that the information afforded to potential investors by prospectuses is fairly clear and precise. I am suspicious that the information required in the accounts to be submitted to the Board of Trade under the Bill will not contain the detail which is afforded in a prospectus. In particular, I should like to know whether the company soliciting deposits has been in existence for some time, the withdrawal of deposits within the preceding accounting period, how much was raised and how much was withdrawn. I should like some description given as to the intention of the company to dispose of the funds which it receives from the depositors whom it is soliciting. It would also be extremely useful to know the nature of the income received in the past, with a breakdown of it, if possible.
I should like my hon. Friend the Economic Secretary to the Treasury, when he replies to the debate, to say whether the advertising to which the Bill refers will include circulars sub-

mitted to individuals through the mails. In the past, I have frequently found it to be the practice of some of the companies which we have in mind simply to take a page of the telephone book and to write to twenty or thirty of the people named on it. Does the Bill cover that form of solicitation?
The list of exemptions from the Bill includes banks. I agree with the remarks of hon. Members on banks and will not make the point again, but my hon. Friend will be aware that building societies advertise stating their assets to be of a certain figure. I would not describe this as misleading in any way, but would it not be more revealing for the public and potential depositors if the figure of net assets were given, or if the liabilities were set side by side with the assets so that potential depositors could judge for themselves?
It seems to me that the Bill offers a means of protecting potential depositors. Obviously, it is not possible to protect people from their own folly, but if the Bill succeeds and the regulations are strong it will be possible for everyone to know exactly in what he is putting money. If it then turns out to be bad, it will not be due to lack of protection that his interest has entirely evaporated.

6.10 p.m.

Mr. Peter Walker: Like my hon. Friend the Member for Bristol, North-East (Mr. Hopkins), I welcome the introduction of this Bill, believing as I do in the principle of affording the maximum protection to the public.
The sadness about people who deposit moneys with companies which then defraud them of those moneys is that those concerned are very often the smallest investors, who can ill afford the losses which take place. This applies particularly to companies offering extravagant rates of interest. The people concerned are in urgent need of an increase in their income, perhaps to meet a perpetual commitment, so they indulge in these investments. Although I welcome the Bill and accept the criticism of my hon. Friend that it has been too long delayed, I think that it ill becomes hon. Members opposite to complain in those terms. I recall that the Bill was not mentioned in the Queen's Speech. I


cannot remember anyone on the Front Bench opposite deploring that it was not in the Queen's Speech, when we were considering the Government's programme of legislation for this Session.
The Regulations attached to the Bill will be the all-important operative part of it. I regret that we did not hear anything about the regulations which the Board of Trade has in mind. This is of vital importance. I hope the regulations will be so worded that the Board will be allowed a certain amount of discretion. For example, if persons running such a company have a rather dubious past, I hope that there will be something to prevent them continuing to operate companies. This at present applies to powers in respect of unit trusts. I hope also that there will be a very strong provision about the liquidity of these companies.
It is not good enough for them to be basically financially sound if they are unable to return depositors' money whenever they demand it. I hope that the form of accounts will be such that there will be a careful check on bad debts. It is easy to give the appearance of a company being solvent when the assets of the company include moneys owing to people upon which it has actually defaulted. I hope that there will be a way to audit the accounts to show that the assets do not include sums of money which are long overdue debts.

Mr. H. Lever: The hon. Member is mistaken if he thinks that the Bill gives the Board of Trade power to prescribe the liquidity arrangements. The only thing it can prescribe is matters which are to be included in advertisements. It does not stipulate the class of persons who are to run this kind of business, nor the way in which they must run it.

Mr. Walker: There is similar legislation by which the Board of Trade gives approval to other forms of corporation which have taken money from the public, such as unit trusts. There the Board of Trade has discretionary powers which I hope it will take in respect of this Bill, I agree that at present those discretionary powers are not available, but I hope that they will be taken by the Board of Trade.
I very much agreed with my hon. Friend the Member for Cardiff, North

(Mr. Box) when he said that it would be far better if the accounts were delivered to the person who is to deposit money prior to his depositing the money. I hope that careful consideration will be given to that suggestion. I should like to see an obligation on the companies involved to send to the depositors a copy of the accounts each year. I cannot see why that is insisted upon in the case of shareholders in ordinary companies but not in the case of people who deposit money in these companies.
I ask the Economic Secretary if the exclusions referring to industrial and provident societies will have regard to the recent case of a so-called co-operative society. I gather that it is completely unconnected with the co-operative movement, but it nevertheless has been operating under that name and the same principle as ordinary co-operative societies. That has resulted in a considerable loss of money deposited by persons who live in the north-west of England. I hope that the Bill will prevent any recurrence of that kind of thing.
I was very disappointed when my right hon. Friend said that within the Bill he considered it was impossible to take action against casino enterprises. I should have thought that it would be easy to include a Clause stating that if a company is advertising for the purpose of using the public's money for gambling, such advertisement should clearly state that that is the position. It is not good enough to say that some of these companies use the word "casino"; some do not use that word. A very considerable amount of money has been invested in these enterprises. It may be stated that this matter is covered by the Prevention of Fraud (Investments) Act, but they have not been caught by that Act. They have escaped abroad with large sums of money which have been invested by depositors.
I do not think it should be beyond the ingenuity of my right hon. Friend to introduce a Clause to prevent that kind of thing. If he finds that impossible, I ask him to take urgent action which would have the same effect. What would be the position of a hire-purchase company which decided to pay its interest on a similar principle as that of Premium Bonds, or if the interest was put into a large pool, a lucky number


drawn, and one had a certain interest? Would that be covered by the Bill?
The casino enterprises have caused a great deal of hardship among groups of people. I know of a factory where the foreman decided to invest some of his money in one of these enterprises. For ten to twelve weeks he received regular payment of £5 a week. By that time his confidence had grown and he told all his friends in the factory what a splendid opportunity there was for them to make money. The whole group of people, who could ill afford to invest money in this way, did so, and lost a substantial amount of their savings in that enterprise.
I ask my right hon. Friend to reconsider the situation to see if in Committee he can agree to some Clause being inserted making it vital that such companies shall clearly state in all their advertising that anyone investing his money in such an enterprise is investing in a highly speculative and gambling concern.

6.17 p.m.

Mr. Percy Browne: I join with my hon. Friend the Member for Worcester (Mr. Walker) on the question of casinos and gambling. Although we do not want to legislate against gambling as such, we are trying to legislate for the small investor who is led up the garden by these advertisements, irrespective of whether or not the word "casino" is used.
I should point out that the Conservative Party specifically mentioned in its General Election manifesto in 1959 that it would do something to overhaul the Companies Act, 1948. Perhaps I should mention something about what the hon. Member for Manchester, Cheetham (Mr. H. Lever) asked. Why should not some people put up a plate at their door saying that they are merchant bankers? I could not agree more, so long as they do not issue misleading advertisements to the public.
Along with my hon. Friend the Member for Bristol, North-East (Mr. Hopkins), I welcome the Bill, because it is a replica of the Bill I introduced with the help of 10 hon. Friends in March, 1960. The hon. and learned Member for Kettering (Mr. Mitchison)

has been quite consistent. At that time he said that it was a mouse of a Bill, although he spent an hour discussing it and finally talked it out. I do not blame him for doing that, because other hon. Members were pressed on this side into talking it out, but today he described this Bill as a mouse of a Bill. I, however, think that the Bill will do a great deal of good. I find that five of the backers of my Bill have now become Ministers, although one has departed again. I see one of my backers on the Government Front Bench now.
I think that the delay resulting between the time when my Private Member's Bill was introduced and now has caused a considerable amount of unnecessary hardship to a large number of people. The hon. and learned Member for Kettering quoted from HANSARD of 18th March, 1960, one part of the speech of the then Economic Secretary, who is now the Financial Secretary. My hon. Friend the Financial Secretary said in another passage of that speech that we
all wondered if there was some possibility that action by the Government in this field which we have been discussing today might have to await the report of Lord Jenkins and his colleagues generally on company law. I would like to assure the House, without any qualification, that there is certainly no need, in respect of some of the things we have been talking about, for action to await the outcome of the Jenkins Committee's deliberations."—[OFFICIAL REPORT, 18th March, 1960; Vol. 619, c. 1685.]
That was clear enough, but what damage has been done in the meanwhile? Certain hon. Members on both sides of the House have mentioned some of it.
To those who live in the country perhaps the greatest fraud which has been perpetrated during the last few years has been in connection with the armchair pig business. Being a small trade creditor myself, I went along to one of these groups and heard that the liabilities were £999,000 and so far as I could discover it bad no assets at all, so I had to write off mine as a bad debt. Many people, as a result of this kind of thing, have had to write off their life's savings.
It sounds very attractive to such people to be told that they can buy a little livestock. In this country, particularly in towns, people are attracted to owning a little livestock in Devon or Northamptonshire. They like the idea of being


able to go and look at that livestock in the summer when they are on holiday, but now they have lost their money.
I was written to by a constituent about a certain concern, which, I think, has now changed hands. He said that he had deposited money with that company in June, 1960, at what he called the low interest rate of 7 per cent. He had then been told by a member of a joint stock bank whom he had met that it would be wise if he withdrew his money. He wrote to the company, but got no answer for two years. This year he was sent £40, but he had deposited £1,600. I must attack the Government for the fact that this legislation has not come forward before. I do not think that they can say they have been waiting for Jenkins. So far as I know, there is only one reference in the Bill to the Jenkins Committee.
Irrespective of who is responsible for the Bill coming forward at the present time, I suspect that the very fact that my hon. Friend the Member for Torquay (Mr. F. M. Bennett), by coincidence, drew a place in the Ballot for Private Members' Bills, and said that he would reintroduce my Bill with certain trimmings, was the reason why the Bill has come before the House at this time. I think it a reflection on the Government that this Bill was not introduced two-and-a-half or two years ago. [HON. MEMBERS: "Hear, hear."] I expected to get a few cheers from the Opposition benches. The hon. and learned Member for Kettering might well have pressed for this legislation two-and-a-half years ago, yet we had not a squeak from him since he talked out my Bill in March, 1960. He could at least have pressed for it to be the legislation to be brought in.
I wish to ask the Economic Secretary one or two questions. The President of the Board of Trade quoted verbatim paragraph 234 (c) of the Jenkins Committee Report. I should like to know why the Bill has not included the other recommendations of that paragraph. Perhaps my hon. Friend will look at that before he replies to the debate. It would be an extremely good thing if in the Bill there were included provisions to carry out the recommendations in paragraph 34, about no par value shares. This is something I have always felt strongly about. I accept that it is a great plank

of Labour Party and T.U.C. policy that one can pretend that an interest rate is 25 per cent., when, in fact, it is 25 per cent. of a par value and not of a real value of a, share, but it is extremely misleading. It would be an extremely good thing if we had no par value shares, as the Americans have.
There has been talk about financial editors and their difficulty in being able to decide which advertisements should be published. As I see it, this is covered by Clause 2 (5) of the Bill. I am delighted that it should be so, because the onus should be not upon financial editors, but upon the Board of Trade, the Treasury or some such Government body. These people are specifically protected by the Bill.
Whilst one may dislike people using the term "merchant banker" if one is a merchant banker of repute oneself—although I do not happen to be—surely the point is that it does not matter what anybody calls himself or his company. We are trying to ensure that if that person then solicits money from the public, not only does he present the accounts to the Board of Trade on the lines stated, but his advertisement is vetted before it is allowed to appear before the public.
My hon. Friend the Member for Worcester, as well as other hon. Members, referred to a matter of importance when he said that not only should the paid-up capital be shown as opposed to the issued capital, but that certain details should be given in the accounts. I suggest, however, that the type of person in whom I was interested in my Bill would not be able to read accounts. The important feature, therefore, is that the accounts should be put before the Board of Trade and that the advertisement should not be misleading. Even with the best will in the world, if some of the small investors in the area which I represent were to be sent a balance sheet, I guarantee that they would not know which way up to hold it, let alone read it properly. That is the job of an expert.
Having said some strong words about the delay, I repeat how glad I am at last to see the Bill. Whilst I accept that in Committee there will need to make alterations in the Bill, I agree with it in principle and I hope that


the hon. and learned Member for Kettering, although he enjoys talking a great deal, will give it a fair wind in Committee.

6.27 p.m.

Mr. John Diamond: It seemed extremely appropriate that the hon. Member for Torrington (Mr. P. Browne) should be the last speaker from the back benches on the Government side, because, as the hon. Member has reminded us, he played a great part in a similar Bill which was introduced as a Private Member's Bill in March, 1960, the contents of which, as well as the hon. Member's speech, I have read with great care.
The hon. Member was today the only Member, on either side of the House, who was not satisfied that the Bill needed a great deal of strengthening. He was, however, in agreement with every other hon. Member who has spoken in saying that it was abominably late. I am, therefore, delighted to follow the hon. Member on that point and to underline how right he is in criticising his own Front Bench for the lateness with which the Bill has been introduced.
Is it not the case that the Bill was foreshadowed in the Queen's Speech as long ago as 1956, that it was announced in the Tory election manifesto of 1959, that all the leading authoritative newspapers—for example, The Times, the Daily Telegraph and the Financial Times—published leaders and City pages directing attention to the need for legislation of this kind in the autumn of 1961 and that several promises have been made by the Government from time to time? The hon. Member for Torrington introduced his Bill in 1960 and was given a clear indication of Government action. We are now at the end of 1962, with no chance of the Bill becoming effective before the middle of next year at the earliest, seven years after it was promised in a Queen's Speech, which is the most authoritative place in which it could be promised. I wish that we could calculate the amount of money that has been lost and the hardship suffered in the meantime, which could have been avoided had the Government got on with their job of governing.
I am sorry that the President of the Board of Trade is not in his place, although, no doubt, he will be returning shortly. I wanted to congratulate the right hon. Gentleman on his speech. I have never heard a shorter or clearer speech in introducing a Bill of this nature. For brevity and clarity the right hon. Gentleman could not be bettered. His manner of speaking is, however, so attractive that I could willingly have listened to him explaining why he was introducing the Bill. He said shortly what some of the Clauses were about, but he did not attempt to justify the purpose of the Bill or to explain why he was tackling it in a certain way. He did not illuminate the Bill with any kind of philosophical background. One cannot possibly deal with a matter like this without a basic philosophical approach which one explains, and, as we are not duly pressed for time, I should like to explain to the House how such a philosophy might be approached.
First, I know that this is a matter of contention. One view by the Government which I share is that this is not the right place to deal with the problems of gambling. I also share the view, which was strongly expressed by the hon. Member for Worcester (Mr. Walker), that if this is not the right place to deal with it another Bill which deals with it should be brought in, and quickly. This, however, is not the place to deal with gambling. We get our attitude confused by trying to deal with investment and gambling, two totally different things, in one and the same Bill.
There is considerable confusion in the public mind about this. I could not do better than quote the Parliamentary Secretary to the Board of Trade, who, in his previous incarnation, took part in the debate on the 1960 Bill, when he said:
National savings do not appeal sufficiently to the potential or new savers who want to make money quickly and who think that investing is a casino.
Those were prophetic words. At that point in time, the present schemes had not arisen in large measure. I do not know whether the fault is that of the Parliamentary Secretary for putting the idea into other people's heads. It shows, however, that there is considerable confusion and that we should keep the two issues separate as far as we can.
Where do we go to try to find the sort of philosophical background against which the Bill is introduced? The President of the Board of Trade did not enlighten us. I therefore turn to the Parliamentary Secretary, who at least gave considerable thought to the problem when he made his speech in 1960. I recognise that he made that speech as a back bencher. Nevertheless, his philosophical approach is, no doubt, the same. The hon. Gentleman's attitude then was that
In a free society people have as much right to lose their money legitimately as they have to make it legitimately.… It is because I wish every man to be a capitalist and not a sucker that I recommend the Bill to the House."—[OFFICAL REPORT, 18th March, 1960; Vol. 619, c. 1645–7.]
The hon. Gentleman was recommending the Bill of the hon. Member for Torrington because he would like every man to be a capitalist and not a "sucker". That is a phrase which also is highly to be recommended for its clarity, if not its elegance of expression. It makes the Parliamentary Secretary's attitude clear and, no doubt, that is his attitude now concerning the introduction of the Bill.
That is not my attitude, nor, I feel reasonably sure, is it the attitude of those for whom I speak. Simply to try to make everyone a capitalist and to have no regard whatever to the purposes of collecting capital together, to have no regard to whether that is a waste of resources and no regard to whether it is done for a social or anti-social purpose, does not justify itself and we need to look far more deeply for a philsophy to inform us as to the correct approach to a Bill of this kind.
I accept what has been said many times about the need to encourage growth at home and abroad by savings wisely invested. That is where we start. To do that, we have to eliminate the fraudulent, as Clause 1 does in the Bill. It is right that we then go on to warn the public of risks ahead. Where the situation becomes too dangerous, however, that part has to be fenced off.
That is the way in which we normally deal with all problems as a Parliament and that is the way in which people expect to be protected. They expect to be told of dangers ahead, but where

the dangers are too great they expect to be immunised in some way so that they cannot do themselves enormous damage. People expect electric wiring points, by law, not to be left bare lest they burn their fingers on touching them. The same can be said to apply to investment.
Three other points only have to be taken into account before we are ready to form a philosophy on which we can judge as to the method in which protection can be afforded. We must have full regard to the fact that where borrowing is done on deposit or otherwise by a certain class of persons who undertake that borrowing with reasonably high and acceptable standards, it is right in their interests that legislation should be introduced to support those standards, so that there should not be impossibly unfair competition between those who carry on with high standards and those who carry on with no standards.
Furthermore, it is right that the borrowing should be susceptible of control in the event of national emergency, which, no doubt, is in the mind of the Government as this is a recurrent problem for them: that is to say, borrowing not in the form of deposits with hire-purchase companies, merchant bankers and industrial bankers, because this is absolutely unsusceptible of control. That is the one element that the Chancellor of the Exchequer cannot control and he must go about it by all sorts of devious methods, which are unsatisfactory for trade—of altering ratios of deposit on hire-purchase agreements and so on—and which may cause enormous damage, whereas all that he would be trying to do is to prevent inflation getting worse by controlling the general volume of credit available.

Mr. F. M. Bennett: I am sure that the hon. Member does not mean to be unfair, but as far as the true merchant bankers, discount houses and acceptance houses are concerned, the Chancellor's restrictions to clearing banks applied equally to them and were issued by directives applied in the same way.

Mr. Diamond: I carefully excluded them and referred to industrial bankers and hire-purchase companies.

Mr. Bennett: The hon. Gentleman included merchant bankers.

Mr. Diamond: If I said merchant bankers, I withdraw it immediately, because they are susceptible of control. I was specifically referring to that area, which largely is the subject matter of the Bill, where credit is not susceptible of control at the time when it is needed to be controlled. That is why fantastic, high rates of interest are offered, because credit is so scarce and it cannot be obtained elsewhere.
Having established the sort of criteria on which one could form a philosophy for judging the Bill, I come to look at the Bill itself. It is called the Protection of Depositors Bill. If the Board of Trade wanted to set an example in probity in the financial world in the description of anything which it is offering to the public, the last Title that it should have chosen for the Bill should be the Protection of Depositors Bill. The Title goes miles beyond the content of the Bill. It is a gross exaggeration which no reputable auditor, if called upon to certify a phrase like this in a prospectus, would dream of certifying.
We can accept Clause 1, which is the penal Clause and on which there is not much to argue. Let us see, however, what protection is afforded in the remaining Clauses. I agree that the right approach is in these advertising provisions. I agree that one should not stop borrowing, as the Bill does not do, from friends and relations in the privacy of small private companies. There is no reason for doing that. I am satisfied that the Bill does not, nor should it, hamper bona fide banking businesses.
For the rest, it is idle to call it a Protection of Depositors Bill. The most it can be called is a "Sources of Information for Certain Depositors Bill". That is as far as it goes. My hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever), who made an excellent speech, made the telling remark that the additional protection alleged to be given by the Bill is totally illusory.
This is mainly an enabling Bill and, therefore, ought not to be called even a "Sources of Information … Bill". This is a Bill under which regulations may be issued specifying actions which in due course will provide sources of information. That is as far as one can go. I agree with those hon. Members who have said that it is difficult to consider the

Bill effectively without having been given the slightest idea of what is in the mind of the Board of Trade as to the regulations which will give the meat, teeth and guts of the Bill. I thought that the President of the Board of Trade was briefed to the point of being unnecessarily brief today.
One must make certain assumptions. Making those assumptions, all that these conditions about advertising will do is to produce information of a detailed kind which will be available too late, as many hon. Members have said, because it is not available before the first deposit is made, unless I misread the Bill. Clause 11 (1 says:
every company … shall, on receiving a deposit from any person, furnish him without charge with—
(a) a copy of the last audited accounts …
It is impossible for a person to have considered it, which is the whole justification for the Bill, in time to decide whether to make the deposit or invest, as it can loosely be called.
What the Bill will do is to produce information which is detailed, technical and distant, because the information is given to him too late. The other information, which is given for future cases, is given by and large in the form of a a return at Bush House. However overcrowded London is, and however much the drift to the South has now taken place, it is still correct to say that not everyone lives within five miles of Bush House or within reasonable bus or underground fare of Bush House. The only way to carry out the purpose of the Bill would be for the proposing investor to take a trip to Bush House and see what is on the file there.
The whole trouble about all this is that, although an investor can be taken to the fount of information, he cannot be made to think. One knows this only too well. Therefore, what are we to do about it if there is a class of investors whom we want to protect, who are susceptible—I will not say gullible, but susceptible—to advertisements of this kind which most of us in the House would tear up as soon as we received them? The very fact that a company issued an advertisement of this kind would lead us to believe that there could not possibly be any sound investment available.
How are we to make a person of that inclination consider carefully before making an investment of this kind? It is him that the Bill sets out to protect. I will tell the House the obvious answer that comes to my mind. I apologise for having a slight personal interest in this matter, being a professional man of a kind. I am merely carrying on a precedent which the Government have set, and set very recently, on the Trustee Investments Bill. The obvious answer to this is to require investors, before making investment, to seek professional advice.
I can justify this very fully by quoting what the Financial Secretary to the Treasury said when he was Economic Secretary to the Treasury. He said this:
My hon. Friend the Member for Torrington pointed out that many lenders have no recourse to expert advice, and I think it is at least questionable whether, without some further g3idance, many people would be much wiser about the safety of their money merely from having read a document required to be deposited with the Registrar of Companies under the Companies Act."—[OFFICIAL REPORT, 18th March. 1960; Vol. 619, c. 1683.]
I accept immediately that there is to be perhaps a more detailed document. I accept that it has to be registered in two places instead of one, but it will be available for inspection only in one. I still say that what the Financial Secretary then said represents the whole truth, namely, that it is very doubtful whether we are any better off in our attempt to protect the public by notifying someone of a source of information of a kind which he probably cannot understand himself and which he would be most loath to look at, he being the sort of person who would invest on deposit in this kind of undertaking.
We are not out to protect the man from investing in a bona fide undertaking. We are not out to protect him from investing in the sort of company in which, if he took advice, he would be advised to invest. We are out to protect the man from losing his money by investing in a ramshackle show which does not know how to carry on its affairs, which cannot get its finance by the ordinary methods, and which tries these underhand methods—I deliberately say "underhand methods"—of appealing to the gullibility of the public and getting large numbers of small savers to part with a very substantial proportion of the money they can afford to

invest. Those are the people we are seeking to look after and protect by the Bill. It is because giving information of this kind without advice is no protection at all that I say that the Bill does not justify its Title in the slightest.
I therefore think that we should look at the possibility of requiring advice to be given. Going on this principle, there is excellent precedent in the Schedules to the Trustee Investments Act, 1961, a very recent Measure. What sort of advice is required? According to the First Schedule, full advice is required before trustees invest in what are called "narrower range investments"—giltedged. Before a trustee invests in gilt-edged, he has to seek advice. Before he invests
In fixed-interest securities issued in the United Kingdom by any public authority or nationalised industry or undertaking in the United Kingdom",
he must seek advice. One would have thought that anybody would be safe in investing there, but the Government require any trustee investing under Part II to take advice first.
Under Part HI, the wide-range investments, he can invest
In any securities issued in the United Kingdom by a company incorporated in the United Kingdom
on taking advice. What are these securities? They are shares, debentures, Treasury bills and tax reserve certificates. In short, the precedents set up by the Government is that no trustee can invest, not in deposits under any circumstances at all, but not even in shares or debentures of companies which are of a very high standing, which have to have a very substantial capital, and which have to have a very good history of dividend declaration. Not even in companies of this kind can a trustee invest in shares or debentures without taking advice.
I am on fairly secure ground here. If a trustee is not allowed to invest in such obviously acceptable investments without taking advice, why do the Government think that the ordinary man who is appealed to by advertising of this kind is capable of protecting himself by merely having access to information of a detailed and, to him, not very comprehensible kind?
I want to follow out the question of seeking advice a little further. If he


were to seek advice, where would he get to? I am anxious that this should be given the fullest consideration, because we should not be left with a position where it could be said of our Welfare State that we look thoroughly after our investors provided they are dead, but only in those circumstances. If he sought advice, what would happen?
I have my own views on this, but I checked up with accountants and solicitors in the House as to what advice they would give to a client who said, "Look at this. I have received an advertisement from a trading or commercial or manufacturing company". I deliberately exclude a finance house of any kind. "I have received this advertisement. They want me to put up DC on loan at interest, without security, without a voice in the management of the company". What advice would such a professional man give to such a client? The answer is very easy. He would tell him not to invest in any circumstances. I cannot imagine that any solicitor, chartered accountant, bank manager or anybody responsible for giving advice about investment would say otherwise.
I am gradually being forced to the conclusion that the flabby provisions of the Bill, as the hon. Member for Cardiff. North (Mr. Box) said, are nothing like adequate to deal with the needs of the situation. The Government recognised this when dealing with trustee investments. They now allege that they are trying to protect the ordinary investor, who has nothing like the advice available to the trustee. We realise that these flabby provisions in the Bill will by no means do.
What should one do? This is the question to which the logic of any argument of opposition to a particular series of proposals inevitably leads. This one has to answer. I agree with the provisions of the Bill in the sense that it is not right to interfere with a private company or a private man borrowing from friends and relations, because they know the background of the person. They know who they are dealing with.
I should have explained that this is one of the three essential elements in investing. I am sorry that I omitted to explain this. The reason why no professional man would advise investment

of the kind to which I recently referred is that the three necessary elements are absent—the element of security, the element of a voice, and the element of knowledge of the background of the business and the person. A person who invests in debentures has security. A person who invests in shares has a voice and some element of security. A person investing by way of a deposit has none of these things. It is the least satisfactory possible kind of investment and should not be dignified with the title of "investment".
It is a pity the Bill does not say just "to deposit" instead of "to invest on deposit". That in itself is a misleading phrase. It is because the private individual has knowledge of his friends and relations, and so on, that we can leave him to lend money to his cousin or whatever the case may be, be it a private individual or a private company.
I agree that we should exclude from the control of the Bill deposits from bankers. Bankers know their business. They can look after themselves. All the three elements I have mentioned are present when a banker deposits, in the true sense of the term, as anyone with an overdraft knows only too well. The banker knows the background, and he has a voice in what is going on. He sees each day how much is being paid in and how much is being paid out, and he has only to lift the telephone to have the managing director or the financial director round to him to explain something or other. The banker has the right to inspect the balance sheet, and gets private returns in addition. He has every possible control of what is going on. His position is totally different from that of the depositor described in the Bill. We can, therefore, exclude, as the Bill does, deposits from bankers.
Then we have to cope with the awkward area left untouched, and I was sorry that when the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid)—who continued the debate from the back benches with an excellent speech, in which he attacked the flabbiness of this Measure and said how much it needed to be strengthened—came to this fence, he not only stopped, but got off his horse completely, and went home. We should have enjoyed hearing a possible solution from him.
I offer a solution which might at least tighten the Bill. Finance houses should certainly be allowed to solicit deposits. They use money, and must borrow it. They cannot finance themselves adequately on share capital and loan capital, or the ordinary kind of debentures. Theirs is a kind of business that requires money coming in at a varying level, so they must have the right to borrow money of that kind. One does not want to limit them to borrowing from the larger sources. They might borrow from smaller sources to the extent which it might be useful, so let them borrow by soliciting in the ordinary way, but let it be controlled—and I mean controlled. Let it be licensed.
Why should we not take powers in this Bill to license every finance house as the Government have taken powers in Section 1 of the Prevention of Fraud (Investments) Act, 1958, to license dealers in securities? I do not know the comparative numbers, but I should not imagine that there was such a difference as would make a difference in the quality of the Board of Trade's administrative arrangements.
This, at all events, would give some real sense of security, and I do not doubt, although I have no right to say it, that, having regard to the evidence the Finance Houses Association gave before the Jenkins Committee, its members would themselves welcome something of this kind. They regard it as essential to discipline themselves in regard to liquidity ratios, size of capital, years of business before becoming members of the Association, and so on, and I am quite sure that they would welcome the approval of such a stamp saying that they were authorised in the same way as dealers in investments are authorised in the Act to which I have referred. I do not think that anything less would he a satisfactory control.
That deals with bankers, private companies, private individuals borrowing without circularising, and finance houses, which would be allowed to solicit for deposits under that kind of supervision and real control. We now come to the private individual. Should he be allowed to solicit? The President of the Board of Trade says "No", and I do not disagree with that. When he was asked for his reason by my hon. and learned

Friend the Member for Kettering (Mr. Mitchison), the right hon. Gentleman gave a very illuminating answer. He said that the private individual would be authorised by the Board of Trade to solicit for deposits in special circumstances only, and that those circumstances would have regard to the objects, I think he said, for which the deposits were to be solicited. I think that those were the right hon. Gentleman's words.
It is always nice to build bridges where one can in matters that are not really matters of intense party difficulties, and I accept immediately that it is right that the Government should prohibit the soliciting of deposits by individuals except by individual permission which would have regard to the objects for which the money was being sought.
Having eliminated that class, we are left only with the rest. The rest would be public companies—and here, let me get one point out of the way at once. The Bill refers to private companies issuing notices to the public and soliciting from the public, and, as I understand it, it says that for as long as they do solicit, and for a little bit longer, they shall be regarded as public companies. After a suitable period, they return to their previous state of being private companies. That is what the Bill now provides.
Let me say at once that I consider that to be an absolutely untenable proposition—I was about to use much stronger language. It is utter nonsense. It is not found in the Companies Act, where the rule is that once a public company, always a public company. In that Act, if a company starts by being a private company and then becomes a public company, there is no means of its again becoming a private company—nor should there be. Why complicate the Bill by introducing provisions by which a private company that has carried the public activity of soliciting deposits from people and then, for some reason, stops, has the right to return to the position of a private company, with the privileges flowing from that? There is no justification for it, and I hope that during the Committee stage this series of provisions will be eliminated.
We are now left with the public companies that are not finance houses; not bona fide banks under the definition of the Companies Act, but those companies


carrying on a business, a trade, a manufacture or commercial enterprise in one form or another, which think it right to finance their business by seeking deposits from the public. For myself, I cannot see why those companies should not be prohibited in exactly the same way as the President of the Board of Trade says that private individuals should be prohibited.
We want to protect the public and the investor. I have tried to show, and I think that I am right, that anyone from whom a deposit was sought under this method by a trading or a commercial company of this kind, and who sought advice, would undoubtedly be advised, "Do not touch that investment with a barge pole." That would be the advice—and the bill for it would follow immediately
In those circumstances, why should we attempt to distinguish, as the right hon. Gentleman has done, between a private individual and a company? I am quite unable to follow that distinction. Why is it right for the Government to prohibit a private individual advertising for deposits, and not right to prohibit a company, other than the one that needs money to carry on business, from advertising for deposits? What is the difference?
Even if there is a theoretical difference—and one knows that behind a company there is a director, a human being, or more than one human being—what is to prevent any individual who would be deterred by the right hon. Gentleman's refusal from turning himself into a public company? He can do that in five minutes—off the hook—as everyone knows. He signs the papers and sends them in, and only has to wait a little while to make sure that the name of the company is accepted. It is as easy as pie to do that. It costs a modest 20 or 25 guineas, and the whole job is done.
In that simple way, he has avoided the whole of the barrier that the right hon. Gentleman was proposing to put between a private individual and his right to solicit money on deposit—

Mr. H. Lever: Is it not quite obvious why the private individual is forbidden to borrow? It is simply that to enable the Bill to control a private individual in the same way as it proposes to control companies would mean compelling

private individuals to keep accounts in a detailed manner, as provided for in the Companies Act. That would have involved skill in drafting and, as the Bill has been hurriedly drafted, the Government have excluded private individuals from it. The reason is not as my hon. Friend imagines, but because the Bill is a hasty hotch-potch. The Government had not time to draft it properly, and this provision would have required more time.

Mr. Diamond: As I do not have my hon. Friend's capacity to discern with such clarity the methods used on the other side, I had not realised that, at the pace the Government go, the seven years during which the Government have been considering the Bill were inadequate for proper consideration.
Be that as it may, I am arguing what I think to be the very valid point that the President of the Board of Trade could have said, "This will cause administrative difficulties. We cannot allow a private individual to solicit deposits, because we have no machinery for controlling him, whereas a company is much more readily controlled." This, the right hon. Gentleman might have said, and he would at least have had the administrative argument to support him. With the honesty that we always recognise in him when he is replying, he at once said that the justification was that the Board of Trade would have regard to the objects for which the money was being solicited.
That is an excellent reason. I am sure that the objects that the Board of Trade would have in mind would be the kind of which we on this side would also approve, but if those objects are a sufficient guide for permitting soliciting of deposits by private individuals, they should be a sufficient guide for soliciting of deposits by public companies. If one could tighten the Bill in this way, it would begin to make some sense, and justify its Title.
I recognise that all this goes a good deal further than the Bill itself provides for, and that there may be difficulties with Financial Resolutions, and so on, but I am illustrating that we can deal with the problem if we want to; that there is likely to be little objection from the interests affected—that, in fact, there could be a great deal of support from the


interests affected—and that what we want to do is to bring the standard of the worst up to the standard of the best—and that is a very high standard—and protect those who really need protection, and whom it is the responsibility of the Welfare State to protect.
I therefore very much hope that when, in Committee, we try to put strength into this flabby Bill, try to give it muscle, try to give it the power to look after the depositor, as the hon. Member for Walsall, South indicated, we will have the co-operation of both sides of the Committee in our attempt to improve the Bill. It is in that hope, and for no other reason, that I share with my hon. and learned Friend, and with others of my hon. Friends who have spoken, the view that in those circumstances, we should not stop the Bill having its Second Reading.

7.10 p.m.

The Economic Secretary to the Treasury (Mr. Edward du Cann): My right hon. Friend the President of the Board of Trade has asked me immediately to make the point that the constructive ideas and suggestions which have been made during the course of this valuable debate will be most carefully considered by him between now and the Committee stage. There is no draft legislation which is so good that it cannot be improved, of course, and we shall look forward to accepting any helpful suggestions which may be made in Committee and which will have the effect of improving the Bill; but I cannot accept that this is a flabby Bill in any sense whatsoever.
I should like to make certain general observations and thereafter I will endeavour to answer as many of the detailed questions which I have been asked as time allows. May I say how grateful we are for the support which the Bill has already received from the vast majority of hon. Members who have spoken in the debate? We particularly appreciate the support of the hon. Member for Westhoughton (Mr. J. T. Price).
The need for legislation arises because a company raising money by taking deposits is not issuing shares or debentures and is therefore not subject to the prospectus provisions of the Com-

panics Acts; nor, since receipts for deposits are not securities, is it subject to the safeguarding provisions of the Prevention of Fraud (Investments) Act, 1939, which, as the hon. and learned Member for Kettering (Mr. Mitchison) said, was re-consolidated in 1958. The point, therefore, is that something has to be done on this subject of deposits.
I was glad that the hon. Member for Gloucester (Mr. Diamond) made the point that most companies advertising for money deposits are well managed and highly reputable. A minority have been recklessly managed, some fraudulently managed, and have got into difficulties and investors have lost money, while others have been in peril of doing so, and prominent among them have been those whom, as my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) reminded us, Parliament has the heaviest duty to protect, namely, the small investor and especially the unsophisticated investor. I was particularly struck by what my hon. Friend said on the subject of the loyalty of these people, for he was perfectly right and it is one of the tragic elements in this whole situation.
Of course, the companies themselves have some responsibility in the matter and it is satisfactory to note that in the Finance Houses Association and the Industrial Bankers Association a good deal of work has been done already to establish common standards and high practices, and I think that one should acknowledge that. None the less, more requires to be done, and it is perfectly plain that the Government have a responsibility in this matter.
There has been a good deal of talk on the subject of delay. That was perfectly fair, but, on the other hand, perhaps a post mortem does not now matter so much as a sensible Measure to deal with the position. Indeed, one can say with absolute certainty that if Parliament approves the Bill, the chance of other people losing money in future must be diminished. The point is that we should get on with the Bill.
The hon. and learned Member for Kettering spent a little time discussing the form that the legislation ought to take, and he referred particularly to the kind of legislation which we have in


respect of building societies. He suggested that this legislation, or, at any rate, some of it, could take that form. That would be perfectly possible and practicable if we were dealing with a homogenous group of companies, but we are not. We are dealing with a large number of companies which are all quite diverse in their methods of operation, and it would not be physically possible to find one method, similar to that with building societies, to control the whole situation.
The hon. and learned Gentleman quoted the Economist, looking fixedly at me the meanwhile. Perhaps I may be allowed to quote it back at him, for the Economist debated this whole problem in the article to which he referred. It came to this conclusion:
Statutory regulations of business practice would hardly afford protection against the determined rogue, and would certainly hinder the honest majority in the legitimate pursuit of business.
That is the Government conclusion and I am satisfied that it is accurate.

Mr. Mitchison: This is clearly something which we shall have to discuss later. However, I believe that there are about 1,200 companies doing hire-purchase finance of some kind. I do not know the Board of Trade's estimate of the number of companies financing property development. Perhaps we could have it and perhaps we could be told who these mysterious "other companies" are. I see that friendly societies are especially excepted. My hon. Friend talked about the man who converted himself into a company, but I know of a man who, being about to marry, turned himself into a friendly society and complicated the marriage settlement. He has been allowed to take deposits.

Mr. du Cann: Having recently been happily married myself, it seemed to me that my duty was to turn myself into an unfriendly society, and that I have done. I have made a note of the hon. and learned Gentleman's question and I will answer it in the course of my remarks.
We were very much taken to task by the hon. Member for Gloucester for not having a sufficiently philosophical approach—I think that I have fairly

quoted which he said. My hon. Friend the Member for Torquay (Mr. F. M. Bennett) said some wise words in this context and perhaps I may add to them. I should like to define what I believe to be the responsibility of the Government in these matters.
We are all very well aware of the social revolution which is now taking place in Britain and which has made such dramatic strides forward in the years since the war. Average earnings have substantially increased and people have more money to spend and more money to save than they have ever had before. On the other hand, most people are comparatively unsophisticated about money matters and there is, therefore, a great need to ensure that they are always put in possession of the fullest possible information wherever possible.
The point has also been made that there is little use in giving people the fullest information if they are unable to comprehend it. I have always thought that there is, therefore, a great need for education in this respect, and although a certain amount has been said about newspapers somewhat cynically—except by the hon. Member for Westhoughton who rightly paid great tribute for the public spirited work which the Investor's Chronicle did at the time of the MIAS affair—newspapers in recent years have done an excellent job in this respect. Not only have many newspapers newly adopted financial columns, but the services given by City editors in questions and answers and in correspondence and through their general readiness to help and advise people who read their columns have merited very strong praise.
The hon. Member for Gloucester suggested that perhaps we should consider writing into the Bill the compulsory requirement that any potential investor should seek advice. That would be very hard to do from a practical point of view and I do not believe that the analogy with the Trustee Investments Act, 1961, is apt, for the types of investment in the First Schedule of that Act are all, or almost all, investments which require approaches to be made on the Stock Exchange, that is to say, through an agent, while in the cases with which the Bill is concerned people are in direct touch with the companies concerned.

Sir H. d'Avigdor-Goldsmid: There is a point which may be overlooked. A stockbroker has a commission which is on a basic rate, whereas one of the many scandals which has occurred with deposits through the actual agents soliciting deposits has been that they have been receiving commissions of up to 25 per cent. or more. That is an especial evil and is relevant to what my hon. Friend is saying

Mr. du Cann: I am grateful to my hon. Friend the Member for Walsall, South for making the point. It is certainly a matter which requires study, but I do not believe that it is practically possible to oblige the man and woman in the street to obtain advice. I do not think that it is on.
The first duty of the Government is to ensure that so far as possible investors are protected against the cheat. The hon. Member for Gloucester was good enough to say that he thought that on the whole the Bill did that. But then we go on to the foolish and the reckless investor and, indeed, the greedy investor, for many of the people who put their money into dubious enterprises are people who are very greedy indeed, and that is their only reason for investing.
I do not believe that the Government are responsible for protecting all these investors and I believe that that is the view of the majority of people. It must be right to endeavour to encourage people to use their individual judgment. If they are careless, that is a matter for them and not for the Government. But they have a second duty, and that is, in framing legislation of any sort not to impose unduly onerous conditions on those who are carrying out, or intend to carry out, legitimate business of any sort, and I am glad that during the debate no one has suggested that this Bill does that.
There are two technical matters about which I should like to give the House further information, and about which I have been asked particularly by my hon. Friends the Members for Torquay, for Cardiff, North (Mr. Box), for Bristol, North-East (Mr. Hopkins), for Worcester (Mr. Walker), and for Torrington (Mr. P. Browne). Both relate to this power of the Board of Trade to make regulations; the first in respect of advertisements, and the second in respect of accounts.
With regard first to advertisements, as my right hon. Friend explained, the principle behind the Clause dealing with this subject is that all advertisements for deposits are prohibited other than those excepted under Clauses 2 and 3. The aim will be to ensure that the advertisement is not misleading, and in general that the persons towards whom it is directed, or their advisers, can obtain, though not necessarily from the advertisement itself, a reasonable amount of information regarding the enterprise with which the deposit would be made. Advertisement for deposits with companies incorporated in, or having established places of business in Great Britain are exempted conditionally. The conditions are that the advertisement complies with any regulations made under the Bill with respect to its form and content, and in particular that the company delivers accounts to the Registrar and to the Board of Trade before advertising.
I turn now in particular to the regulations which will be made to control the form and content of these advertisements. It is not the intention that they should prevent the sort of two-line advertisement which invites the public to apply for further information about a company. This type of advertisement, as we know, is standard practice, and is used by hire-purchase companies of high repute. It is rather the intention to prevent advertisements which are misleading because they give partial information, and my right hon. Friend gave examples of this earlier. I will repeat them in this context: for example, assets without liabilities, and authorised capital without paid-up capital. My hon. Friend the Member for Torquay asked about the use of a word "guaranteed". I would say that this would fall within this context.
The regulations will require that advertisements shall give the name of the company, and its registered business name if it carries on business under a name other than its company name. Advertisements other than the short two-line advertisements, for example circulars, about which I was asked by my hon. Friend the Member for Bristol, North-East, or the further particulars offered in short advertisements, may be required to give particulars about such matters as dates of incorporation,


names of directors, names of auditors and bankers, and matters of that sort.
My hon. Friend the Member for Walsall, South referred in particular to change of ownership, and again I think that this is a valid point. They may also be required to state the date of the latest accounts delivered under the Bill and show where they may be inspected.

Mr. F. M. Bennett: This is important in view of the challenges which have been thrown across the Floor of the House. My hon. Friend has reassured me on the use of the word "guaranteed" and presumably he would agree that "full security" is equally misleading. Would my hon. Friend also make clear that the use of descriptive titles for which there is no basis of fact would also come under this control? In other words, if permission is refused for "bank" to be part of the title, it will not be permissible for a person to add it after he has been refused it as part of the title of the firm unless he gives good reasons why he should be permitted to use that form of title.

Mr. du Cann: There are difficulties about this point, but I shall refer to it in a moment.
I turn to the accounting provisions about which I was asked by my hon. Friends the Members for Cardiff, North and Bristol, North-East. These provisions are the core of the Bill because they are designed to provide information which will enable depositors, their advisers, and financial commentators, to evaluate the financial strength of the companies which advertise for deposits.
May I say a further word in parenthesis on the subject of advisers. I am not altogether unsympathetic, and I do not want the hon. Member for Gloucester to think that I am, in regard to his point about advisers. I mention it in this context particularly because it refers again to the suggestion which has been made that perhaps the layman cannot understand accounts. What I think is interesting in this context is that it is much easier today than it was 10 years ago, and certainly infinitely easier than it was 20 years ago, for a man to consult a bank manager or an accountant, and this will be a continuing process.

Mr. J. T. Price: The Companies Act requires directors of public companies registered under that legislation when seeking new equity capital by public subscription, to publish a whole mass of detail in their advertisements for such revenue. Why should not similar particulars be given by financial institutions inviting depositors to put their money into industrial banks and so on? Why cannot the same rules be applied?

Mr. du Cann: I think that the whole point is that it does not seem to matter very much in what way the information is given, provided it is given: whether it is given in halves or in pieces, provided it is all given. That will be the cumulative effect here. It would be an intolerable burden on companies of this sort if every time they advertised for any small amount of money, which they might do because they might have need to raise only a small amount of money, they were obliged to print a full prospectus. That is unnecessary. Provided the advertisements are not misleading, and provided the man to whom they are appealing not only has the information, but is told where he can get it, I think that honour will be satisfied. Any other obligation would be too onerous.
The provisions of Clauses 5 to 14 are technical, and I propose to deal only with some outstanding features. I want therefore to deal with the form of accounts. The Bill enables the Board of Trade to make regulations as to form and content. These regulations will take account of the facts, first, that a part, and possibly a large part, of a company's liability will be in the form of obligations towards its depositors; second, that part of a company's assets will probably be in the form of debts owed to it. I think that these are the basic points. Part of the assets in the form of debts owed will be the case when a company is engaged in hire-purchase business, and this will be the position of most of the companies to which the regulations will apply.
The regulations will also require information on the following points. First, the amount of deposit borrowing and the amount of total borrowing; secondly, the number of depositors divided into classes according to when the deposits become payable; thirdly, the assets of the company which consist of debts


owed to it under instalment credit agreements—that is to say, hire purchase agreements, credit sale agreements, agreements for the hiring of goods and loans repayable by instalment, with some indication of the division of agreements between, for example, vehicles, farm and industrial equipment, household goods, and other goods, and after deducting the provision made for bad or doubtful debts fourthly, assets of the company arising from loans made other than under instalment credit guarantees. Some analysis of these loans will be required to show when they are repayable, and whether, for example, a large sum is due from any one person, or whether they are made to associated companies.
The regulations will additionally require a company to give a description of the general nature of its business and all the business of its subsidiaries, if any.
I realise that this is a technical and probably rather boring explanation, but I thought it right to go into some detail in the matter so that the House and the management of some of the companies which will be affected may be as fully informed as possible. There will, of course, be a further opportunity to debate this matter in Committee, and indeed when the regulations are laid before the House there will then be an opportunity to debate them.

Mr. Mitchison: I take it that these regulations are to be made under Clause 12, and that this information will be supplied to the Board of Trade. What will the Board of Trade do with it to protect the depositor?

Mr. du Cann: I would say that they would do as follows: they would examine it with care and attention, and would attempt to evaluate it and use it as an indication—which would be very easy to the trained mind—of the substance and stability of the company concerned, and then keep the situation constantly under review—to coin a phrase.

Mr. Jay: Surely, if they had been doing that for the last five years just as many depositors would have lost just as much money as they have in fact lost.

Mr. du Cann: That is not an appropriate point.

Mr. Mitchison: As the hon. Member rightly says, this is a matter of import-

ance, I want to know what the Board of Trade will do with this information in order to protect the depositors. The President of the Board of Trade suggested that the financial newspapers could do the job on behalf of the Board of Trade. Are the financial editors to be summoned to a conference and handed the records of all these companies? Are they alone to be privileged to see them? What else will happen with them?

Mr. du Cann: What my right hon. Friend had in mind was quite clear. If these documents are put on the file of the Registrar of Companies, access is free to bankers, stockbrokers, accountants, solicitors and financial journalists, and the fact that these documents are on file must inevitably be a deterrent to the dishonest operator and manager of a company. That point should be recognised.
I said that I would do my best shortly to answer some of the other points made in the debate. My hon. Friend the Member for Torquay asked about the position of acceptance houses. These will be treated precisely in the same way as are banks and discount houses, that is to say, they will be exempted from the Bill's provisions. The hon. and learned Member for Kettering asked me particularly about the types of company involved, and how many companies were likely to be affected by the provisions of the Bill. It is not possible to make a precise estimate, but the number must he between 500 and 1,000. The main type of company is either the hire-purchase company or the credit-trading company. There are a certain number of property development companies also, and those two classes together make up the majority.
Other classes about which hon. Members have asked are only peripheral. None the less, it is possible for them in the future to engage in other forms of ordinary, legitimate commercial activity while raising deposits of this sort.

Mr. Mitchison: How does the hon. Member reconcile his figure of between 500 and 600 hire-purchase companies with the Economist's estimate of 1,200?

Mr. du Cann: I do not reconcile the two t they are obviously different. What I said was that, on the best estimate we could make, between 500 and 1,000 companies would be affected. It is anybody's


guess as to the number ultimately affected, but it will certainly amount to a fair number.
The hon. Member for Westhoughton and my hon. Friend the Member for Torquay drew attention to the need to prevent the misuse of the term "banker". I understand their feelings in this regard, but although it must be absolutely appropriate to endeavour to avoid misleading descriptions of any sort, there are peculiar difficulties in regard to this term. It is now in general usage by some highly reputable firms, and I am not satisfied that it will necessarily be advisable to go outside the recommendations of the Jenkins Committee. That Committee appreciated the difficulty and said:
We agree that this practice is undesirable but we think that a general control over the use of even a limited number of descriptions would be going too far".
None the less, we shall consider what has been said on this point.
My hon. Friend the Member for Bristol, North-East asked whether circulars are advertisements. They most certainly are. The hon. Member for Gloucester and my hon. Friend the Member for Worcester asked why accounts could not be sent to people before deposits are made. From my own experience in the City of London I can tell them that this is not a practical possibility. It would not be possible to guarantee to get the accounts or the information that it was sought to produce into the hands of everybody, as a matter of obligation, before they made deposits. Managers of these companies receive money out of the blue, without knowing where on earth it has come from, or they may receive it through agents. The question of a yearly distribution will be considered.
As for casinos, we had a division of opinion between the hon. Member for Gloucester, on the one hand, who thought that the casino type of advertisement was not appropriate for the Bill, and other hon. Members—including my hon. Friend the Member for Cardiff, North and my hon. Friend the Member for Torrington—who said that the casino type of advertisement should be covered by the Bill. Again, we shall consider what has been said. Nevertheless, there

are great difficulties in drafting appropriately to include casinos within the scope of the Bill. We shall consider the matter carefully, but I am not saying that it can be covered.
A number of other points have been raised. Time does not allow me to answer them all, but I repeat that they will be considered between now and the Committee stage. I also appreciate that many hon. Members have spoken with special knowledge of these subjects, which has made their contributions to the debate very valuable. I repeat especially to my hon. Friend the Member for Walsall, South that if the Bill can be improved in Committee we shall do our best to improve it.
I end on a personal note. As hon. Members on both sides of the House will know, this is a subject in which I have taken an interest for some years. Like others who have spoken in the debate, I have asked a series of Questions in the past. I have pressed for this type of legislation, and it is therefore a great personal pleasure to have some responsibility for introducing the Bill, under the leadership of my right hon. Friend the President of the Board of Trade. I pay tribute to him today for introducing the Bill at all.
In my judgment this is a good Bill, but I do not say that it is so good that it cannot be improved. This would be too much to claim, and I have the authority of my right hon. Friend to say that we shall do our best to improve it in Committee. But I claim that the Bill is necessary and appropriate. I believe it to be very much what is needed, and I warmly commend it to the House.

Mr. Mitchison: Will the hon. Member consider one possibility? I listened carefully to what he said about other companies receiving deposits, and I came to the conclusion that, substantially, this was a Bill to deal only with two classes of depositor—the hire-purchase finance depositor and the property development depositor. I am not asking for an answer now, but I suggest that it might be wise to consider introducing a Bill to deal only with those two classes and to deal later with other matters which seem to me to be of minor importance. I except only the fraud classes, which are of general application, and ought to be.

Mr. du Cann: I am sure that my right hon. Friend will note what the hon. and learned Member has said. There is always difficulty in legislating in a changing situation. The Bill has some flexibility, through the regulations; indeed, that is one reason why it has been designed in this way. At the moment it takes in all depositors, and that is probably right. However, we shall certainly consider what the hon. and learned Member has said.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 38 (Committal of Bills).

Orders of the Day — PROTECTION OF DEPOSITORS [MONEY]

[Queen's Recommendation signified.]

Considered in Committee under Standing Order No. 84 (Money Committees).

[Sir ROBERT GRIMSTON in the Chair]

Resolved,
That, for the purposes of any Act of the present Session to penalise fraudulent inducements to invest on deposit, to restrict and regulate the issue of advertisements for deposits and to make special provision with respect to the accounts to be delivered by and the supervision of companies which issue such advertisements, it is expedient to authorize—

(a) the payment oust of moneys provided by Parliament of any administrative expenses incurred by the Board of Trade in consequence of the provisions of that Act; and
(b) the payment into the Exchequer of fees paid to the Registrar of Companies under that Act.—[Mr. Erroll.)

Resolution to be reported.

Report to be received Tomorrow.

Orders of the Day — COAL INDUSTRY BILL

As amended, (in the Standing Committee), considered.

7.41 p.m.

The Parliamentary Secretary to the Ministry of Power (Mr. John Peyton): I beg to move, That the Bill be now read the Third time.
In moving the Third Reading very formally 1 want to make it quite clear that as the House had a very full discussion

of the problems of the industry on Second Reading I do not intend any discourtesy to those hon. Members on both sides who have shown such interest in the industry's great problems.
I hope that the House will now agree to give this very simple Bill a Third Reading.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Orders of the Day — EDUCATION (SCOTLAND) BILL

Order for Second Reading read.

Bill referred to the Scottish Grand Committee.—[Lady Tweedsmuir.]

PURCHASE TAX (MOTOR CARS)

7.42 p.m.

Mr. Douglas Jay: I beg to move,
That an humble Address be presented to Her Majesty, praying that the Purchase Tax (No. 6) Order 1962 (S.I., 1962, No. 2434), dated 1st November 1962, a copy of which was laid before this House on 5th November, be annulled.
I believe that the House tonight ought to have a fairly close look at this Order, not because we on this side of the House are opposed to a cut in Purchase Tax on motor cars—we certainly are not—but for two other reasons. The first is that the Chancellor of the Exchequer introduced not a little but quite a large autumn Budget a month ago and, apart from one day on the debate on the Address, the House has had no opportunity of discussing it, let alone voting on it. This is a rather startling contrast to the elaborate procedure which we usually pursue on Finance Bills.
Secondly, assuming that the Chancellor was going to give an expansionary stimulus to the economy, for which we have long been asking and which in our view should have been given some months earlier, we have to ask whether this particular cut in Purchase Tax is the right way to do it.
Therefore, I think that the House should note what a long step the Chancellor has taken this autumn in removing control of taxation, which is supposed to be the special prerogative of this House,


out of the hands of Parliament altogether. I am glad to see that we have the Chancellor with us tonight, even at this hour, and I should like to ask him a question. Did he decide to launch a stimulus by way of Statutory Order in this form and to tell the House he was not giving us an autumn Budget simply because he had said a few weeks before that there would not be an autumn Budget, or did he do this because he did not want to go through the trouble of the whole procedure of a Finance Bill this winter? Either way, the whole thing is not very creditable to the brave new world which he is supposed to he encouraging at the Treasury.
We on this side of the House believe that it is necessary to use fiscal instruments for planning purposes at various times of the year, and it was for this purpose that the Labour Government introduced a Clause in the 1948 Finance Act which has enabled the Chancellor to introduce this Order this autumn. We were thereby showing a piece of foresight for which I hope the Chancellor is now duly grateful. But he is now going rather far, not in the economic sense—I do not think that he is going far enough in that respect—but from a Parliamentary point of view in the use of these powers this autumn. I would remind the right hon. Gentleman, incidentally, that the Labour Government in 1949, between November and Christmas, carried through a full minor Finance Bill when they believed that changes in taxation had to be made at that time. This shows that it can be perfectly well done if one wishes to do it.
During the last two years, however, we have had four Budgets and only two Finance Bills. Three weeks ago, in his speech on the Address, the Chancellor put into operation changes affecting £100 million to £150 million of tax revenue without the House having any chance until this Order comes before it tonight to give statutory approval or disapproval to it. In view of the very large amount involved, I think that the right hon. Gentleman has taken a long step towards removing not merely control of expenditure, but control of taxation out of the hands of this House altogether. Certainly, at the very least, his action this autumn is a formidable precedent.
Are we really sure that this particular and highly discriminating cut from 45 per cent. to 25 per cent. in the tax on passenger cars is the best way of injecting £50 million into the economy at the present time? By thus concentrating his whole relief on this one item in the 45 per cent. rate of Purchase Tax, the right hon. Gentleman has provoked some rather big and perhaps unforeseen consequences. To give one example, up to now there has been a wide differential between tax on passenger motor cars and tax on bicycles. Until the Order came into force it was 45 per cent. on cars and 25 per cent. on bicycles, as I am sure the hon. Member for Kidderminster (Mr. Nabarro) knows. As a result of the Order, that differential now disappears at one stroke.

Mr. Gerald Nabarro: Very good.

Mr. Jay: Yes, but the hon. Member, well-informed as he sometimes is, may not realise that according to my information a quite dramatic fall in orders for motor cycles has followed this sudden disappearance of the differential in their favour, with resultant depression in that industry. One Lancashire firm informs me that orders have fallen off so seriously in the last few weeks that redundancy notices are now to be issued, and this, incidentally, in an area where cotton workers have been taken on by a firm manufacturing bicycles. Was that the result that the right hon. Gentleman intended, or did he fail to foresee it?
Why did he concentrate the whole of this relief in the form of lower Purchase Tax on motor cars alone, instead of spreading it widely on other articles in the form of lower Purchase Tax or something else? The right hon. Gentleman argued in a rather long, and, I thought, rather sly, preamble in his speech in the debate on the Address, on 5th November, that his concentration on this item was because motor car production influenced so wide an area in the engineering and steel industries and because it had such a fine export record. He went on to paint a happy picture of employers, employees and everybody else living in harmony in the motor industry. That, of course, was before Sir Patrick Hennessey visited Merseyside.
I do not believe that those were the real reasons why the Chancellor selected


this item. I believe that the real reason —perhaps the presence of the hon. Member for Kidderminster is evidence for it—is that the Government are pursuing a long-term policy of levying Purchase Tax less and less on the more expensive items like motor cars, television sets and some other things and more and more on necessities like clothes, boots and shoes and furniture. Each time when the individual step is taken, we are given an alternative explanation as we are now, which the Government hope will sound plausible.
It so happens—the Chancellor of the Exchequer did not point this out—that the £50 million Purchase Tax relief he is now giving to motor cars, which inevitably goes mainly to more expensive cars, exactly balances the extra revenue raised last April by extending the Purchase Tax to sweets and some other foodstuffs. Might the right hon. Gentleman not have spread the benefit more widely if some of the revenue taken by the new tax on sweets had been handed back?
It is interesting to observe the total effect of the series of Purchase Tax changes completed by the Order which we are discussing now. They began eighteen months ago, with the £200 million increase in taxation which the Chancellor's predecessor, the right hon. and learned Member for Wirrall (Mr. Selwyn Lloyd), made in July, 1961, again without a Finance Bill. The changes made then by the previous Chancellor, of course, were the main cause of the unemployment and depression we now see all around, including Merseyside. Before that time, this was the situation. Motor cars were taxed at 50 per cent. Clothes, boots and shoes were taxed at 5 per cent. and sweets were taxed not at all.
Now, after these eighteen months of manipulation, the tax on cars has come down from 50 per cent. to 25 per cent., the tax on clothes, boots and shoes has doubled from 5 per cent. to 10 per cent., and the tax on sweets has gone from nothing to 10 per cent. The tax on other more expensive items in the highest range has, of course, come down, though only slightly, from 50 per cent. to 45 per cent.
Altogether, this represents a massive switch within the Purchase Tax structure

lightening the burden on those who buy motor cars and aggravating it on those who buy clothes, boots and shoes and some other things. This inevitably means a shift of tax on to those with the lower rather than the higher incomes. I do not think that the Chancellor will deny that it is all part of a plan to make the Purchase Tax not a selective tax with some sort of social purpose, but a general indirect tax falling indiscriminately on all articles of ordinary consumption, closer to the more reactionary system of taxation which prevails on the Continent of Europe.
If the Chancellor thinks, as he may, like the hon. Member for Kidderminster, that this is the right thing to do, he should say so frankly when he is introducing the changes. [Interruption.] I am sure that the hon. Member for Kidderminster will do so because he, at least, says what he means. At the moment, I am asking the Chancellor what he means and what his reasons were for making this rather peculiar change.
If one sets this tax change against the background of the changes made in the last two years, the total result is seen to be even more startling. It may be summed up in this way. Taxes on the general consumer have risen by over £200 million. Taxes on cars, on profits, property and Surtax incomes have come down by about £200 million. That is the shift in the tax burden which the Chancellor is completing by the Order we are discussing now, despite all his claims to be reversing the policies of his predecessor in office, who, from the point of view of the party opposite, seems to have been even more ineffective in his leaving of office than he was in occupying it.
I believe, and I think that most of my hon. Friends believe, that it would have been wiser and fairer to have granted some part of this relief to goods like clothes, boots and shoes, furniture and other household necessities. To have done so would have spread the relief in a more equitable way socially, industrially and geographically. I assure the Chancellor, in spite of all he said about the depressed state of the motor industry, which is true enough, that the textile industries are every bit as much in need of help as the motor industry, and they are largely situated in more vulnerable areas. We read this morning—I


expect the Chancellor noticed it— that in October there was a sharp decline in the sale of clothes and footwear, a decline which is likely to lead to a spread of unemployment.

Mr. Deputy-Speaker (Sir Robert Grimston): I do not wish unduly to restrict the debate, but the right hon. Gentleman is going a little wide of the Prayer, which deals with the Purchase Tax on motor cars. I have allowed him to stray rather far and I hope that he will not go further.

Mr. Jay: That was all that I intended to say on that point, Mr. Deputy-Speaker. I think that, in considering motor cars, we should have an eye on what is happening elsewhere and the possible alternatives.
In the present rather lamentable state of our economy induced by the deflationary policies of the previous Chancellor, I agree that any expansionist measure is better than none. For this, at least, we are thankful, and we do not intend to oppose the Order tonight. However, we are very far from believing that the Chancellor has selected the best, the wisest or the fairest method of giving the relief which is so obviously needed.

7.57 p.m.

Mr. Gerald Nabarro: I certainly hope that the Order will not be annulled tonight. It is probably the most important single Purchase Tax Order in the form of delegated legislation laid before the House during the past 15 years. As for the imputation by the right hon. Member for Battersea, North (Mr. Jay) that the Chancellor of the Exchequer is sly, I can only ask, does he look a sly chap? My right hon. Friend has a most honest, frank and open face, a face which was widely acclaimed on the television screen last evening when he was in a "hot" seat, dealing with local unemployment. There is nothing sly about the Order.
I shall not attempt to go over the ground again. On Guy Fawkes' day, when he brought in such an appropriate relief from indirect taxation, my right hon. Friend explained all the reasons for the momentous, dramatic and largely unexpected reduction of Purchase Tax on motor cars, the biggest single yielder

of Purchase Tax in all the Schedules, which he then announced. The House will find his words reported in the OFFICIAL REPORT, columns 628–638, of 5th November last.
As for the influence of this reduction upon the total yield of Purchase Tax, it is significant that the previous Chancellor was budgeting in April, 1962, for a yield of £606 million from Purchase Tax in the year 1962–63, but, notwithstanding this reduction on motor cars, which would cost the Chancellor £50 million to £60 million in a full year, still the yield from Purchase Tax in 1962–63 will be £597 million. The difference between the figure postulated and estimated last April and the figure now estimated after the reduction is no more than £9 million out of a global total of approximately £600 million. Therefore, over all, one gathers the inference that consumption of articles subject to Purchase Tax is rising and that the net result to the Chancellor will be a yield almost as large as it was before.
This is really a Common Market measure. I am in no doubt about that. Adjusting for the differences in system, the French domestic taxation on motor cars is of the order of 24 per cent., the Italian is of the order of 17 per cent., the West German is of the order of 13 per cent. Before the change we are now discussing, ours was 45 per cent. I was gratified to hear on Guy Fawkes' day for the first time the adoption by the Chancellor of the Exchequer of the argument which my hon. Friends and I have used ad nauseam during the past few years, that an excessive and discriminatory rate of Purchase Tax on motor cars militated against the best export performance. By the single action of reducing the Purchase Tax on motor cars from 45 per cent. to 25 per cent., the Chancellor has brought us nearer to the rates applicable in the Common Market countries, which I believe is wholly desirable.

Mr. Jay: Does not that argument apply to other things besides motor cars?

Mr. Nabarro: Certainly, but my trouble is that—

Mr. Deputy-Speaker: Order. We are discussing motor cars now.

Mr. Nabarro: That is exactly what I was going to say, Mr. Deputy-Speaker. I never get myself out of order, whether tempted by the right hon. Gentleman or not. I do not propose this eventing to discuss the other articles Which are still subject to the 45 per cent. Purchase Tax. It would be out of order to do so. But the situation is very unfair, Mr. Deputy-Speaker.

Mr. Harold Lever: Mr. Deputy-Speaker, is it out of order to use the argument that, if a cut of this kind is justified in relation to motor cars, then one is compelled logically and inevitably to apply it to other articles and, hence, to use that argument as a reason for not making this cut? We are discussing whether we should allow this cut to be made. If I were to argue—I do not say that I shall —that this cut ought not to be made because it will raise an irresistible demand for similar cuts, having regard to the Common Market argument, would not that be in order?

Mr. Deputy-Speaker: Yes; I think that a passing reference of that kind in order to support an argument on the Prayer would be in order, but to go into a lot of detail about the rates of Purchase Tax on other articles would not.

Mr. Nabarro: The hon. Gentleman interrupted my passing reference, Mr. Deputy-Speaker.
The Purchase Tax on motor cars has come down from 45 per cent. to 25 per cent., leaving at 45 per cent. cosmetics, radio and television sets, gramophones and discs. I hope that my right hon. Friend will, when be begins his budgetary considerations next April, accord to those articles, equally important relatively to our export performance, the preferential treatment which he has now given to motor cars.
I come now to something else about the motor car industry as a whole which ought to be said within the context of our debate on this Order. Not only does this reduction in the Purchase Tax on motor cars increase the competitiveness of the British vehicle industry in shipping goods all over the world by bringing our rates of domestic taxation closer to those of our principal competitors, but it engenders also a much larger home market for

motor cars and creates the possibility of taking up a great deal of unused capacity in the motor industry.
It is surprising how large that unused capacity has been during the past few months. This unused capacity, if the Ford strikers on Merseyside will allow the completion of the factory there, and if the other motor vehicle factories being erected on Merseyside, in Scotland and elsewhere are in due course completed, will be greatly increased in the next 12 months.
The National Institute Economic Review of September, 1961, published unchallengeable figures about the capacity of the British vehicles industry. It said that in the calendar year 1963 the capacity of our vehicles industry would be 2,710,000, of which approximately three-quarters would be motor cars and approximately one-quarter commercial vehicles. But if we base the full year's production of motor vehicles in this country on what was turned out in the initial 10 months of this year, the latest available figure to 31st October, and relate that pro rata to the full year 1962, the output of our motor industry will not be much more than 1,710,000 vehicles.
Thus, comparing 1962 as a whole with the estimate for 1963, there will be an unused capacity for producing 1 million vehicles, or something of the order of 36 per cent. of the total estimated vehicles capacity of the United Kingdom—that is, if the present rate of production in 1962 is carried forward into 1963. No industry can operate economically and efficiently with only 64 per cent. of its capacity used and 36 per cent. of its capacity unused. The principal reason why this Order is so important is that it makes a dynamic contribution to filling the unfilled capacity for 1 million motor vehicles during 1963 if all these new factories are to be fully employed.
I have a direct constituency interest in this, because Kidderminster produces most of the floor covering for the motor vehicles produced in the United Kingdom. The rate of Purchase Tax on the floor covering is only ten per cent. as a result of the benevolence of successive Chancellors of the Exchequer towards their colleague sitting for the Kidderminster constituency.
I wish to say a word to my right hon. Friend the Chancellor of the Exchequer


about the fiscal dyspepsia from which his predecessors have suffered over the years. Nothing is more damaging to the motor industry than constant hiccuping in the rates of Purchase Tax. I do not think my right hon. Friend is aware of the extent to which this has gone on during the period of the Conservative Administration. [HON. MEMBERS: "Hear, hear.") But it was far worse under a Labour Government. Hon. Members opposite must wait for it. What is more, the rates were two or three times as high under a Labour Administration. [Laughter.] The memory of the hon. Member for Manchester, Cheetham (Mr. H. Lever) is very bad. He conveniently forgets these things. Perhaps he will allow me to refresh his memory.
When the Labour Administration was in office—I will go back to 1947—the rate of Purchase Tax on cars was 66⅔ per cent. In 1950, the higher rate of tax—that was, the rate discriminately applied to cars costing more than £1,280 wholesale—was removed by a Labour Administration, reducing the rate to 33⅓ per cent. The right hon. Member for Battersea, North was then the Financial Secretary to the Treasury and Sir Stafford Cripps was the Chancellor of the Exchequer. The right hon. Gentleman then sat on this side and I sat on the benches opposite. I used to attack him about the Purchase Tax on cars.

Mr. H. Lever: Mr. H. Lever rose—

Mr. Nabarro: No. I will give way when I have finished my statistical dissertation.
In 1950, the rate was down to 33⅓ per cent. In April, 1951, it went up to 66⅔ per cent.—a violent hiccup. That is where the Tories took over.
Under a Tory Administration, the rate has drifted down.

Mr. Lever: Mr. Lever rose—

Mr. Nabarro: When I have finished this I will give way—hot pants.
In 1953, the Tory Administration reduced the rate from 66⅔ per cent. to 50 per cent. In 1955, in that dismal, October, autumn Budget, the rate was increased to 60 per cent. In 1959, before the last General Election, the rate was again reduced to 50 per cent. In July, 1961, when the regulator was applied,

the rate went up to 55 per cent. In April, 1962, it came down to 45 per cent., and now at long last it is down to a standard 25 per cent.
The point that I want to make to my right hon. Friend is that there have been eight Purchase Tax changes in 12 years. This kind of fiscal dyspepsia is disastrous to the organisation of large-scale production in this country.

Mr. Lever: Hear, hear.

Mr. Nabarro: Now that we have the rate down to a standard 25 per cent., for goodness sake leave it at 25 per cent., along with the rate on all other comparable goods, including motor cycles, which should be taxed at the same rate as motor cars.

Mr. Lever: I wish to ask the hon. Gentleman one brief question. In the course of these fiscal hiccups in motor car Purchase Tax under a Labour Government, which pleased me no more than the violent continuation of them under the Conservative Government, was there ever an occasion when, as a result, the industry was forced to work to only 60 per cent. capacity, as it is at present?

Mr. Nabarro: Many economic factors bear on an argument of this kind. I do not wish to go over what my right hon. Friend said on 5th November, but I very much applaud what he said at the foot of column 628. His words were exceptionally well chosen and, in my fiscal philosophy, impeccable. I quote them:
The motor car industry is a fundamental part of our whole engineering complex. Apart from the direct employment offered by the great motor car companies, the activities of their many suppliers from sheet steel from Llanwern to the smallest electrical components "—
he might have added there on my behalf, "including floor covering"—
have a marked effect on the whole level of business activity in this country. It is, moreover, an industry with a fine export record." —[OFFICIAL REPORT 5th November, 1962; Vol. 666, c. 628–9.]
There is the justification for this Order.
The right hon. Member for Battersea, North, because it is a figure favourable to the Tory Government, omitted from his speech the figure I am about to give. It should be engraved on his heart. During the last period of 12 months for which figures have been


published, £660 million was the export performance of the British vehicles industry. This represents 18¼ per cent. of the whole of visible exports from the United Kingdom. Any single industry which can contribute such a vast sum to Britain's well-being should not be the subject of onerous and discriminatory indirect taxation. That is the justification for this Order.
I finish by reminding my right hon. Friend—[Interruption.] I have asked 400 Parliamentary Questions on Purchase Tax. I am entitled to talk about the modest success that I have had tonight. It has taken a long time to achieve it.

Mr. Cyril Bence: And to talk about the hon. Gentleman's modesty.

Mr. Nabarro: Yes, of course. My right hon. Friend the Chancellor of the Exchequer, in reply to a Question by me on Purchase Tax on 20th November, said:
I shall be reviewing the whole Purchase Tax situation in … my forthcoming Budget." —[OFFICIAL REPORT, 20th November, 1962; Vol. 667, c. 986.]
I want a standard rate, a flat rate, a non-discriminatory rate applied to all articles currently subject to Purchase Tax. I should be out of order if I went over them. I am glad to see you nodding assent, Mr. Deputy-Speaker. I have no intention of going over them, but the right hon. Member for Battersea, North made the point, in passing, that the top rates were coming down and the bottom rates were going up. That is exactly the motion of compression that I seek in order to achieve a standard rate of 16⅔ per cent., or 2d in the 1s., which should be the Chancellor of the Exchequer's goal in his 1963 Budget.

8.16 p.m.

Mr. Cyril Bence: Once again, we have enjoyed the very modest—more modest than usual—dissertation of the hon. Member for Kidderminster (Mr. Nabarro) on the situation of the motor car industry in relation to Purchase Tax since 1945. However, I was shocked that, having praised the Chancellor of the Exchequer for his perspicacity and having expressed faith in his ability to handle the finances of this country, he should have suggested

that his right hon. Friend had not noticed what has been going on in the last twelve years.
I should not have much faith in any of my right hon. Friends if I thought that for the past twelve years he had not noticed what had been going on. But we on this side—I am sure that I speak for many of my hon. Friends—take the view that the Chancellor of the Exchequer knows very well what has been going on during that period.
I have always thought the imposition of Purchase Tax on the motor car a mistake. The world motor car industry is highly competitive, and our competitors are very competent manufacturers of the internal combustion engine. Our capacity to compete with them, especially at the end of the war, has been very difficult. I have been in the motor industry for the best part of my life, on the manufacturing side. The people of this country do not realise the very difficult situation that we were in in 1945. The hon. Member for Kidderminster, who used to live in Birmingham, knows that the motor industry in 1945 and 1946 was in a very difficult situation, and that the cutting back of home consumption was absolutely essential.
We were then besieged by demands for motor cars. I remember Captain Black getting 1,000 toolmakers together in one of the subsidiaries of the British Motor Corporation and saying that if we could get out a particular model by 1947 he would see that each of us got one of those models at cost price. By the time that we had tooled that model, and got it on to the markets of the world, the Purchase Tax had been pushed up so fair that those of us who put OUT names down for a oar, even if we could have had one, could not have afforded it.
The world market was there for the British motor car at that time, and one of our great problems was that the British steel industry found it very difficult to give us the sheet steel that we wanted for passenger cars.

Mr. E. Fernyhough: We had to import it.

Mr. Bence: Yes. The steel industry was not equipped to provide the motor industry, which had developed a good deal in the war, to give us in quantities


the quality of steel that we needed. In view of the high Purchase Tax at that time, there was some justification for it keeping the motor car in vast quantities off the British market.
I agree that the situation could not have persisted for very long. Once the sellers' market began to disappear, which it was bound to do as the war receded, the motor car industry would have to have some of these shackles removed if it was to compete successfully with the French, German and American motor car industries, particularly the French.
The hon. Member for Kidderminster said that this reduction in Purchase Tax is a move towards Britain entering the Common Market. Purchase Tax or no, the Common Market countries have taxes on their cars. If we send cars to that market, I believe that the British motor car manufacturer can compete successfully with any manufacturer on the Continent. They have taxes on their home market. Taxes are levied on the cars that we send over there and taxes are levied on the cars that they send over here. Today, some of our cars are successfully competing in the markets of Europe and some of Europe's cars are successfully competing over here.
Many other factors are involved in exporting our cars successfully to the Continent. I do not want to get out of order, but I sometimes wonder, when the hon. Member for Kidderminster talks about reduction of Purchase Tax helping us to export more cars to Europe, whether he realises that one of the biggest obstacles is the inability of British manufacturers to get garage agents in Europe. They are tied up with Renault, Simca and Mercedes Benz. It is often difficult to get agents in cities in France and Germany. Limitations are placed on their capacity to accept agencies, not only for British cars, but for other French or German cars. The same kind of thing happens here. A man takes up an agency for Ford and is not able to take an agency for another car. Those are some of the difficulties about exporting cars to Europe.
I do not think that the reduction of Purchase Tax will give a quick stimulus to the manufacture of cars. I think that it will take two years to put an extra kick into the demand on the home

market. My car had a scheduled trade-in value and I knew the schedule. I knew that I could buy a new car and trade in the old car for that figure. I went to a garage, but found that the trade-in value of my car has now dropped £110. I have had my car for three years. It is part of my purchasing power on a new car, so my purchasing power has been reduced by £110. I admit that the price of the new car has been reduced by £93. I have, in fact, lost purchasing power which I had three months ago to buy a new car.

Mr. R. Gresham Cooke: Prices always fall in November compared with August.

Mr. Bence: I am quoting a particular case, although I know that it is dangerous to base a general proposition on a particular case.
As a result of the cut in Purchase Tax, my purchasing power for a new car has been reduced by £110 to buy a car which has fallen in price by £93, or some such figure.
The hon. Member for Twickenham (Mr. Gresham Cooke) quite rightly says that this is in the autumn and that prices in the second-hand car market will rise in April or March. I know that the second-hand car market is an important factor in the motor industry. Long before the war we used to say that if second-hand prices were rising we would be busy in the factories, and if they were falling we would be slack. That was because a second-hand car represents part of the purchasing power of a member of the motoring public. I suggested to the garage owner that I should wait until the spring, when prices would rise, but he said, "No, they will not. They are more likely to fall." It is very doubtful whether a cut in Purchase Tax does stimulate the motor car industry.
I believe that it is desirable to cut the tax because I think that we should gradually eliminate it. I do not like indirect taxes at all. I prefer direct taxes. They can be borne better and more justly by the community than can Purchase Tax. The hon. Member for Kidderminster, who has put down 400 Questions with a view to getting a reduction of Purchase Tax, disagrees. He thinks that indirect taxes are a good


thing, if they are based on his figures. I hope that we shall not get another 400 Questions from him with a view to reducing the tax further. I do not see why 25 per cent. should be regarded as sacrosanct. Why should it not be 15 per cent.? Is this a scientifically worked out figure? Has the hon. Member for Kidderminster worked out in his statistical dissertation that 25 per cent. is the right figure?

Mr. Nabarro: I did not work it out in the course of my statistical dissertation, for the very good House of Commons reason that it would have been grossly out of order to do so, but currently a series of articles is appearing in up to two dozen newspapers, giving my detailed plans for the reform of most of our indirect taxation. If the hon. Member will remind me, I shall arrange for him to have a copy, for example, of the Nottingham Guardian and Journal of 30th November, which will be left for him on the rack. Then I shall be very much in order in giving him the particulars.

Mr. Bence: I shall be very pleased to read them, but I cannot discuss that now because it would be out of order, as we are discussing Purchase Tax on motor cars. I do not see why 25 per cent. should be regarded as the right figure. I was surprised that the hon. Member complimented' the Chancellor on reducing Purchase Tax to that figure.
A problem has been arising since 1947 with the increased accessibility of motor cars. The fellow who used a motor bike now buys a car and the fellow who used a bicycle buys a motor cycle. When we bring the sales of motor cars into the widening income scale, we diminish the sale of other means of transport, such as the pedal cycle and the motor cycle. The more that motor cars become accessible, the fewer motor cycles will be sold.
That is well illustrated in France. One sees very few motor cycles in France because the motor car is cheap there. Models such as the Renault are becoming accessible to more and more people so that the motor cycle is very seldom seen. In this country the motor cycle industry may go through a very difficult time, especially when our friends across the seas use ways and means of frustrating our export to their countries where

we have been successful in selling pedal cycles.
I welcome the cut in Purchase Tax, and I hope that we are moving away from the time when we could use fiscalc instruments only as a regulator. We are moving from the old traditional idea that we must have an annual Budget about 6th April and do things on the day which stand for the whole year come hell or high water, if that is in order. I have never liked that idea. I suppose that it is a nineteenth century tradition in line with hunting, harvesting and sowing. It is the spring of the year, so we sow taxes and reap them later; then start sowing again the following April. It is a good idea to get away from the traditional annual ritual which we call the Budget and, instead, to use this sort of means throughout the year as the economy moves and we see the needs of the country and of the people.
I welcome the Chancellor's cut in the Purchase Tax on motor cars, although —let us be fair—it does not help us in Scotland one bit. The motor industry which has gone into production at Bathgate is engaged on commercial vehicles, on which there is no Purchase Tax. Therefore, the production of commercial vehicles from Bathgate is in no way stimulated by the relief of Purchase Tax.

Mr. Gresham Cooke: It will stimulate the Rootes factory at Paisley.

Mr. Bence: Yes, there will be stimulation to Rootes from the person who comes into the market for a new car for the first time. With the person who already has a car and has to trade it in with his dealer, however, the stimulation is not so great. Indeed, I believe that it will be a minus quantity because of the fall in values in the second-hand car market.
If the Chancellor is thinking in terms of stimulating the economy and increasing the employment of our people, there are fiscal measures that he could adopt—perhaps not on these lines—to help the traditional industries of, say, Scotland and the North-East Coast, where the situation is bad and will not be helped in any way by the Order. None of our industries will be stimulated. I do not think that there are


any strip mills on the North-East Coast. We have one in Scotland at Ravenscraig, but its production is small.

Mr. Nabarro: All this is out of order.

Mr. Bence: It is not out of order, because that is the purpose of the cut in the Purchase Tax. I doubt whether we will see any effect from it in less than two years. I hope, therefore, that the Order will be accepted and that we have this cut in Purchase Tax and that, having helped the industries of the Midlands, the Chancellor will follow this up with early fiscal measures to help our sorely-tried heavy industries of the North-East and Scotland.

8.32 p.m.

Mr. R. Gresham Cooke: I am sorry to hear the sad saga about the second-hand price of the car belong-Mg to the hon. Member for Dumbartonshire, East (Mr. Bence).

Mr. Bence: It is very unfortunate.

Mr. Gresham Cooke: The great fallacy in the hon. Member's argument was in comparing the price of the car which he might have got in August with the price today, in the fogs of November or December. The hon. Member should have compared the price which he might have had on 5th November, when Purchase Tax was reduced, and then seen the difference between the prices at 5th November and today. He would find that the fall in the price of his secondhand car had not been as great as the fall in the Purchase Tax on the new car that he would have bought.
I strongley advise the hon. Member, however, not to defer his order for a new car and to take delivery until the spring, because he will not get delivery then. There will be waiting lists of three months covering March, April and May. That is my advice to the hon. Member.
I have seen it suggested that the Order should not have been introduced because, it is argued, it will not help the country as a whole but will help only the southern part. There is grave misconception throughout the country that the motor industry resides solely in Birmingham, Coventry, Luton, Dagenham and Oxford. The truth is very different. Five great new plants are being erected. Three of them—Vauxhall, Standard-Triumph

and Ford—are on Merseyside and between them will employ about 17,000 people. Then there is the Rootes plant, a company with which I am associated, where £23 million is being spent, at Paisley, to produce small cars at the rate of 3,000 a week from March and April onwards.

Mr. Bence: I hope that the hon. Member will make it clear that although we have the motor plant at Paisley, this plant and the plant of B.M.C. and those on Merseyside will be assembling motor car components the majority of which are manufactured in the Midlands.

Mr. Gresham Cooke: I am not saying where they are manufactured. What I am saying is that there are five great new plants scattered over the north of England and Scotland to employ tens of thousands of people and that, therefore, the benefit of tonight's Order will spread among those plants. In addition, there is the Pressed Steel plant at Linwood alongside the Rootes plant there, near Paisley.
The benefit will spread through the steel industry, through Sheffield, Lancashire, South Wales, Cheshire, Flint and elsewhere. The benefit will spread through a large number of towns in, for example, the production of gears at Huddersfield, batteries at Manchester, brake linings at Chapel-en-le-Frith, forgings at Lincoln, springs at Leeds, components at Warrington, and so on.

Mr. Nabarro: And carpets at Kidderminster.

Mr. Gresham Cooke: For the sake of the record, I have a list of 15 other towns which are very much interested in the Order and which are worth putting on record, particularly for those hon. Members in whose constituencies they fall: exhaust pipes at Halifax, carpets at Heckmondwike, brake linings at Wallasey, anti-freeze at Keighley, overdrives at Sheffield, castings at Derby, upholstery at Rossendale and Glasgow, leather cloth in Lancashire, plastics at Blackpool, shock absorbers at Beverley and Ossett, in Yorkshire, timing chains at Manchester, belting at Manchester, safety glass at Team Valley, gaskets at Gateshead and tyres in Renfrewshire and Edinburgh. That does not include plants in South Wales—for example, the


new Rover factory at Cardiff, Ferodo at Caernarvon, Girling at Cwmbran, and Rubery Owen at Wrexham.
That disposes of the argument that this Purchase Tax Order is, as the right hon. Member for Battersea, North (Mr. Jay) has hinted, a geographical one to help only the most prosperous part of England. In my view, it will help the whole nation, including Scotland, and, therefore, there is much about it to be desired.

Mr. Bence: It does not help Scotland.

8.38 p.m.

Mr. Harold Lever: The fiscal Baedeker which we have just had indicated to us shows how various motor parts are made in all sorts of places throughout the country. This has little relevance to the proportion in which the people in these various towns compares with the total for the industry. Nobody can seriously suggest that this is not a measure which is predominantly helpful to the motor industry of the Midlands. It need not be wrong for that reason, but one should not evade the issue by quoting exhaust pipes made in Halifax or carpets made in Kidderminster.

Mr. Bence: At Heckmondwike.

Mr. Lever: I do not rise with any conviction about the Order; I am not sure whether it is good or bad.

Mr. Nabarro: Sitting on the fence again.

Mr. Bence: Sitting on the carpet.

Mr. Lever: The hon. Member for Kidderminster (Mr. Nabarro) had a good run, in which his modesty wrestled with his ebullience. It is not for me to decide which was the winner in that interesting if unequal battle. The hon. Member must understand that there are hon. Members like myself who come to the House in search of instruction, preferably from the Minister, especially when mighty matters of financial weight are being handled by the Chancellor himself, whom we are glad to see present, although I was rather sorry that the description of him offered by my right hon. Friend the Member for Battersea, North (Mr. Jay) was taken amiss. My right hon. Friend did not say that the Chancellor of the Exchequer was sly.

Mr. Nabarro: Yes, he did.

Mr. Lever: My right hon. Friend said that the Chancellor's speech gave sly reasoning. That is quite another matter. I am not qualified, nor would I desire, to pass judgment on the physiognomy of the Chancellor in the confident way in which the hon. Member for Kidderminster did. Since the right hon. Gentleman's elevation to his distinguished office, whether he has the sly look or the open and candid features that have been claimed for him by his on. Friend, he certainly has a slight tendency to look like his future monument in the Lobby rather than the living embodiment of physical orthodoxy in charge of our financial destiny.

Mr. Jay: Would my hon. Friend agree that it is less uncomplimentary to accuse the Chancellor of the Exchequer of being sly than it is to accuse him of dyspepsia, as did the hon. Member for Kidderminster (Mr. Nabarro)?

Mr. Nabarro: If the hon. Member for Manchester, Cheetham (Mr. H. Lever) will permit me, I said that the record of Purchase Tax changes was one of fiscal dyspepsia. I did not say that my right hon. Friend was physically suffering from dyspepsia. There is a difference between "fiscal" and "physical", but the night hon. Gentleman has failed to perceive it.

Mr. Jay: On a point of order. Is it not more uncomplimentary and more unparliamentary to accuse a Chancellor of moral dyspepsia than of physical dyspepsia?

Mr. Deputy-Speaker: That is not a point of order. I think we had better get on with motor cars.

Mr. Lever: At all events, the hon. Member far Kidderminster, unlike the hon. Member for Twickenham (Mr. Gresham Cooke), mingled his encomiums for the relief being granted by the Chancellor of the Exchequer with at least some recognition that the relief was from his predecessor's—that is, the same Government's—misdeeds. The hon. Member for Kidderminster was not guilty of that vast enthusiasm for the man who applies the bandage without at least giving some recognition to the fact that it was the same hand which had inflicted the wound. It is ridiculous


to hear these hallelujahs in praise of the Chancellor for stimulating a sorely tried industry when it is the same Conservative Government who were responsible for the economic and fiscal policies which left the industry in its present parlous condition.
In the course of this statistical dissertation it has been said that the Chancellor as an occupational disease tends to suffer from physical dyspepsia, that his digestion is affected, and we are expected to be less alarmed by it on the ground that it is an inevitable occupational hazard for anyone in his office, because it is said that Labour Chancellors of the Exchequer produced, if I may use this unparliamentary phrase, the same financial burps in relation to the motor trade.
I want to point out—the hon. Member for Kidderminster did not challenge this—that, whatever the Labour Government did as to Purchase Tax and the motor industry, one thing is clear. They never dealt the industry the kind of blows which this Government have been dealing it and which have forced the industry to work to 60 per cent. capacity. It was under the Labour Government that the splendid record, rightly praised by the hon. Member, was built up for exporting. When my right hon. Friend was at the Treasury I remember how the man from Whitehall was much despised by Tory Members. It was said that there could not possibly be a virile export trade in motor cars or anything else except on the basis of a thriving home trade, and every effort was made to discourage the Labour Government's pressure to encourage exports.

Mr. Gresham Cooke: The hon. Gentleman surely will remember that in those days there was very strict control of steel supply, with the result that many factories were working at 50 per cent. capacity in the late 1940s.

Mr. Lever: I gather that the hon. Gentleman is saying that the strict control of steel resulted in manufacturers working to 40 per cent. or 50 per cent. capacity.

Mr. Gresham Cooke: In 1947 or 1948 motor manufacturers were producing nothing like what they might have produced with the plant available, owing to the strict control of the supply of steel.

Mr. Deputy Speaker: We are getting a long way away from the Prayer. I understand the hon. Gentleman's argument so far as it has gone, but we cannot now discuss the control of steel in the 1940s.

Mr. Lever: The hon. Member's argument, apart from it being out of order, would be interesting and cogent if it had the slightest relationship with the actual facts. Apart from that, it is a very strong argument. Neither the steel industry nor the motor industry worked to such marked under-capacity at any time in all the tribulations of the Labour Government as they do under the dispensation of the present Government. One of the reasons is what has been called the dyspepsia, which I should have thought could have been more aptly described as epilepsy, in what is considered to be the economic and financial planning of the Government. It is not a joke. I have every sympathy with motor manufacturers and industrialists, because they have to cope with these ups and downs of Purchase Tax.
I was very intrigued by the argument of my hon. Friend the Member for Dunbartonshire, East (Mr. Bence). He suggested that the immediate effect for a couple of years of reducing Purchase Tax would be to increase the price of motor cars for those who want to buy. It is obvious from this argument that, if the Chancellor of the Exchequer wanted to stimulate purchases, he should have increased Purchase Tax, presumably to a very high level Intriguing as the argument of my hon. Friend was, he will find that it has a modest modicum of reality. He is confused in supposing that even in the short term the reduction in Purchase Tax is a deterrent to buying cars.

Mr. Bence: Not in the long term.

Mr. Lever: Even in the very short term, apart from the dislocatory effect of these ups and downs on all the traders and manufacturers, no doubt the Chancellor of the Exchequer will have the satisfaction of seeing some increase in the consumption or user of motor cars.
My question is this. We are told that there is an unused capacity of 1 million cars, or that there will be a surplus capacity of 1 million vehicles for next year if we go on as we are. There are


two ways of tackling this problem. One is to come to the conclusion that we ought to encourage the use of another million motor cars, for which we certainly have not the roads or other safety margins. The other is to take the view that perhaps the motor car industry has over-extended itself and that we ought not to make it the sole bearer of this fiscal reduction and increased consumption. I do not know whether this is so. I should like the Chancellor to tell us why he asks us to agree to this Order.
My right hon. Friend was rather precipitate and impetuous in promising that we would not divide against the Order. He was speaking for the Front Bench and not necessarily for the great number of his enthusiastic colleagues here who want an explanation before we allow this to pass. I hope that the Chancellor will tell us that he is satisfied that we should use up this extra capacity of 1 million cars. Perhaps it is a bad thing to do. It is very right and proper that the motor industry should be proud of its fabulous export record, but we for our part ought to have a little anxiety on this score.
Is it wise and reliable that we should have such a high percentage of our exports deriving from motor cars in the world we see ahead of us, in which other countries are also expanding their motor industries? Is it wise to allocate skilled labour to that industry, or should we be working on a wider and more sophisticated front? I say this in no party political spirit, but what was justified by the immediate exigencies after the war under a Labour Government may not be wise long-term policy now—

Mr. Bence: The organisation of the motor car industry is such that within the ambit of its production and assembly there is a wide variety of consumer durables, apart from the motor cars.

Mr. Lever: I dare say that is so, but we should at least consider whether that industry can be expected to bear as much of the export load in the years ahead as it has successfully borne in past years. I am not sure, and I want some information from the Chancellor, who is good enough to be present now to help us to understand the Order, as to whether we are not being rather naïve in dropping the Purchase Tax so sharply.
I should like to see a stable level of Purchase Tax—I much deplore the ups and downs that have made long-term planning impossible—but I am not sure what the stable rate should be. Perhaps it should be 100 per cent., or it may be that the present 45 per cent. is right. I am open to be convinced. The Chancellor is fortunate in that he has me at one of my most open-minded moments, and I am ready to be persuaded that the high rate is wrong, that 45 per cent. is right, that the level of production is the right one for us to aim at, and that we should be steering our skilled labour, not back into the motor car industry, but into more permanently hopeful industries. That is not to say that the motor car industry should not know its future, and the level at which it is expected to operate.
I am always puzzled by the economic experts who constantly hold forth to the House—and both sides of the House are very liberally endowed with those economists, professional and amateur, who offer their advice. Unfortunately, most of the advice is contradictory. We used to be told that we should have high Purchase Tax on the motor car and on similar goods because, without a soft home market, the manufacturers were encouraged to find markets abroad. On that basis, and at different times—though not immediately before General Elections—innumerable firms have been wrecked by Conservative Government's stop-go policy.
Another person will say that we cannot have high Purchase Tax on motor cars and similar things, because we then get a thinner home market, and do not get such long runs as we do when the tax is lower. We are told that the home market gives the enormous runs that make production cheaper, and that the goods can be exported because they are competitive. That, of course, is in direct opposition to the argument in favour of the high tax. Both of these theories seem to have had their play in the last 10 years, with not very notable advantages to the industry.
We are also told that when we take off Purchase Tax we increase consumer power, so that the home market eagerly buys cars, and the industry has the eagerly awaited long run which will make it competitive in world markets. We have


hardly finished applauding the Ministers and economists concerned before we are told that the country is on the verge of a balance-of-payments crisis, that we have to draw in our horns, that inflation is rampant, that the £ is going down, and that nobody has confidence in us nor have we confidence in ourselves. It is all very bewildering to the simple man who wants to vote on such great issues.
Another problem faces me, as an open-minded Member. The hon. Member for Kidderminster says, and it has also been said in the newspapers, that this cut in Purchase Tax was, as it were, a Common Market cut. I happen to be in favour of us going into the Common Market, on terms that I consider to be suitable, and in the interests of the country—but only on those terms. Naturally, I do not wish us to go in on any worse terms than we can get. But one of the complaints of my less enthusiastic hon. Friends, and not an unjust one, is that the Government, as they put it—though they may be exaggerating—are hell-bent to go into the Common Market on any terms. I am afraid that the argument of the hon. Member for Kidderminster, unless disavowed by the Chancellor, supports the theory that the Government have made up their mind to go in irrespective of the terms.
If that is true, if the Government are already shaping their fiscal legislation on the basis of going into the Common Market, it is quite clear that, even if they do not negotiate an improvement in terms, we shall go in. That, surely, must be deplorable, especially as, if the hon. Member for Kidderminster can see the point, presumably the negotiators in Brussels can see the point, and can say, "This new Chancellor is even doing a sort of autumn Budget, on the assumption that Britain is going into the Common Market. He is structuring the financial and fiscal policies of the Government in advance of the terms being agreed, so it is a certainty that even if we are tough and do not make reasonable concessions, he cannot draw back."
That was intended as a compliment, but it is a very serious charge against the Government if this cut in the Purchase Tax can be said to have been made in anticipation of going into the Common Market. I, as an enthusiast for going into

the Common Market, would say that the time to start drafting fiscal policies on the basis of being in the Common Market is after we have agreed the terms and they have been proved to be satisfactory and they have been approved by the House of Commons. It is disastrous if we are to announce to the world that we have already made up our minds to go into the Common Market irrespective of the terms which we get.

Mr. Jay: Does not my hon. Friend recall that the previous Chancellor of the Exchequer, when making Purchase Tax cuts in last spring's Budget, used this argument explicitly?

Mr. Lever: It is a most unfortunate argument and it ought to be disavowed.
Having trespassed overlong on the indulgence of the House, I will sum up my argument. I disapprove of these violent jerks which masquerade as economic planning and I sympathise most sincerely with the industrialists who have to cope with them, for they, more than any other single factor, are responsible for the growth rate in this country being smaller than that of many European countries. Oddly enough, I believe that we are in a period where a slightly more laissez-faire and humble attitude by the Government, combined with serious general planning, would be more favourable to growth than the governessy and excessively interfering and jerky method of handling matters which has been undertaken by the Government.
Looking back on it, with all these different new economic and financial weapons which the Government have got into their hands, it has struck me that oven the last few years that successive Chancellors of the Exchequer have lacked more and more like a rather tipsy organist coming for the first time to the amazing Würlitzer organ and wanting to experiment with the different keys and stops and notes which can be produced from them. They have not been able to keep their hands off Profits Tax and Purchase Tax and Surtax and any other tax.
I regret having to find myself in direct disagreement with one of my hon. Friends who applauded the principle that it is splendid that we should have abandoned the nation of altering these taxes once


a year. Again on a spurious argument, the Government claim the right to tinker with all these economic controls at regular intervals. Why is it that every half year—

Mr. Deputy-Speaker: Order. The hon. Member is beginning to go a bit far from the Order.

Mr. Lever: I do not want to challenge your Ruling, Mr. Deputy-Speaker, but I have not been speaking except with great relevance to the point. Let me put it this way. The Government are asking us in the middle of the year to reduce the Purchase Tax on motor cars. One can object to that reduction because one thinks that it ought not to be reduced, or because one thinks that it should not be reduced in the middle of the year. I have dealt with whether it should be reduced and I should now like to deal with whether it should be reduced in the middle of the year. I am not arguing in any frivolous spirit. This is a serious matter.

Mr. Deputy-Speaker: As long as the hon. Member will restrict his argument to motor cars, he will be in order.

Mr. Lever: With respect, the rules of the House have never been such as to take restriction to the point where one cannot make passing references so as to link motor cars, in this case, to the general argument. That is so that one does not argue in a vacuum. I do not want to mix my metaphors and I have never seen a motor car in a vacuum.
I am merely saying that we ought not to tinker about with the Purchase Tax on motor cars in the middle of the year. I do not want to be fractious, but I think that it is within my competence to say that the Purchase Tax on motor cars ought not to be altered in the middle of the year, because if the Purchase Tax on motor cars is altered, the Purchase Tax on other things should be altered, and that becomes part of the system of interference with these taxes at bi-annual intervals. I go from there in all seriousness to say that, having gone from annual to bi-annual intervention with these taxes, we will proceed to monthly intervention before we finish.
In theory, it would be a splendid thing every other week to have the

Chancellor coming to the House at his most monumental to announce that, after a scientific and electronic detailed survey of the economy, he had decided to add 2d. on there and to take 6d. off here, to expand on the left and to contract on the right, to expand in Birmingham and to shrink in Manchester. and so on throughout the country
I do not approve of this sort of transaction as evidenced here tonight. It is bad enough that we have the Government's ineptitude inflicted annually on the sorely tried industrialist. To have it inflicted by-annually and perhaps even quarterly, will put industrialists into an even more chaotic situation than they have been in the past. This argument that we should welcome annual interventions by the Chancellor in our economic affairs is put forward with a certain specious plausibility.
The core of this policy is the belief which most Chancellors have in their own infallibility. If I could believe in it, I would welcome the frequent interventions of the Chancellor of the Exchequer, but in my experience of many Budgets, autumn and otherwise, the capacity of the Treasury and the Chancellor to assess with any degree of accuracy the economic situation, or the effect of their fiscal measures on it, has been so slight that it does not warrant more than a modest approach, more than an annual intervention by the Chancellor in matters of this kind.
There are other matters which I think could be dealt with at more frequent intervals, such as the Bank Rate, but I do not want to stray out of order or to appear to be discountenancing frequent attention to the economic regulators by the Chancellor of the Exchequer, but this sort of regulator, when frequently taken on and off, has the effect not of producing the results wanted by the Treasury, but of dislocating, unnerving, and upsetting the calculations of industry.

Mr. Bence: Is my hon. Friend suggesting that the Bank Rate burp is not so injurious as the Purchase Tax burp?

Mr. Deputy-Speaker: Order.

Mr. Lever: I would welcome the opportunity of giving the House my views about Bank Rate changes. They are more frequent than good sense warrants, but there is justice in wanting


to change those more than annually. There is no good sense in seeking to change Purchase Tax every half-year, or every three months, or as often as the Chancellor thinks it will have beneficial results.
I promised to sum up, and now I must do so. First, I object to the sharpness of the drop. Secondly, I object to the way in which it has been done in the middle of the year without adequate discussion and without adequate Parliamentary attention and control over it. Thirdly, I object to the fact that no comprehensive case has been made for it, and, so far as we have been given a case, it relates to the Common Market, and that argument I have dealt with and disproved. Finally, I hope that the Chancellor will enlighten us as to his purpose, and, within the rules of order, show how this is related to his general economic and financial policies.
Although we do not see eye to eye on political, fiscal, or economic measures, I am sure that everyone on this side of the House, wishes him well and hopes that he is successful in his office, and I hope that we shall hear some outline of how this is related to the general policies he is undertaking at the present time.

9.3 p.m.

Mr. E. Fernyhough: I think that we all appreciate the motives which compelled the Chancellor to reduce the Purchase Tax on motor cars from 45 per cent. to 25 per cent. He was aware of the growing unemployment problem, and he assumed that a reduction of this size in the tax on motor cars would give the economy a spur and reduce substantially, in a short time, the large number of men now registering at the employment exchanges. But I very much doubt whether what the Chancellor has done will have the effect.
As the hon. Member for Kidderminster (Mr. Nabarro) made clear, 36 per cent. of the capacity of the industry is already under-used.

Mr. Nabarro: I did not say that. I very deliberately said that when all the motor car factories at present in course of construction are completed, and assuming that they are completed in 1963, compared with the rate of output far motor vehicles in 1962 there would

be an unused capacity of 1 million vehicles.

Mr. Jay: indicated assent.

Mr. Nabarro: I am glad to see the right hon. Gentleman assenting. That is what I said, and it is a very different matter.

Mr. Fernyhough: If there is no unused capacity now—

Mr. Nabarro: There is some.

Mr. Fernyhough: Perhaps the hon. Member will tell us what it is. If it is not 36 per cent., how much is it?

Mr. Nabarro: The unused capacity in the motor car industry today is about 17 per cent. When all the construction at present in hand is completed next year, if the current rate of output does not rise the unused capacity by the end of 1963 will have risen from 17 per cent. to 36 per cent. That is a very different matter.

Mr. Fernyhough: It will not mean a greatly increased level of employment in the motor car industry, or in the ancillary industries. I do not believe that Chapel-en-le-Frith, which makes brake linings, will engage many more people simply because Purchase Tax on motor cars has been reduced and, presumably, the 17 per cent. unused capacity will be brought into use.
In very few of these supplying factories will there be a greatly increased use of labour. If there is any increase, it is likely to be in the very areas where the Chancellor says that it is undesirable at present. All the activities of the Chancellor and the Government are directed towards taking employment to the North-East, Scotland, Wales and Northern Ireland, and not encouraging any further employment in what is called the coffin area, but this reduction in Purchase Tax, will increase the demand for labour in those very areas where there is now relatively full employment, while making little or no contribution to the substantial unemployment problem which exists in those areas which I have mentioned.
I am delighted when Purchase Tax is reduced, if it means that goods become cheaper for people to buy. But if the Purchase Tax on motor cars is reduced


from 45 per cent. to 25 per cent., it means that we must sell 80 per cent. more cars in order to bring in the same amount of revenue. If we do not do that, assuming that the Chancellor insists on obtaining the revenue he has budgeted for we must ask where he is going to place the burden of additional taxation to make up for what he is losing by this reduction.
I am not opposed to this reduction, provided that he does not place the burden upon a section of the community that can ill afford to bear it, but I am opposed to his collecting £50 million from children's sweets and passing on a reduction in Purchase Tax on motor cars.
Like other hon. Members who have spoken, I represent an area which has a growing unemployment problem. The unemployed are not excused from paying Purchase Tax. If they have to renew some of their household equipment or items of clothing, the unemployed are not excused Purchase Tax. At a time when unemployment is rising and when hundreds of thousands of people are worried almost to their graves about how to make ends meet because of the miserable pittance they are allowed, any Government who had £50 million or £60 million to give in relief might have looked to the people who most badly need relieving. They might have thought how they could help those citizens who are really deserving of the Government's sympathy and understanding at present.

Mr. Bence: And the sick.

Mr. Fernyhough: Yes, and the sick and the pensioners.
None of these is excluded from Purchase Tax. They pay the same rates irrespective of the size of their incomes. I know that each week in the areas I have mentioned unemployment overtakes more and more families. Whenever the Chancellor decides to remove a burden and ease the lot of any section of the community or of industry he ought not to forget the pensioners, the sick and the unemployed, because every additional penny of relief to them is far more important than it is to many people who will benefit from the relief which the Order will give.
I believe that motor cars are now included in the cost-of-living index. If

that is not so I should be glad to be corrected, but if they are included there is something radically wrong with our sense of values. Nobody pretends that the 540,000 unemployed, the 1½ million on National Assistance, and the hundreds of thousands of sick possess motor cars. This means, statistically, that it will appear as if the cost of living has gone down, whereas for these people it remains where it was before, whatever effect this has on the index.
I do not agree with the hon. Member for Kidderminster that the Order makes a difference to our export trade. The British home market now is of such a size and nature that whether it is increased or not makes relatively little difference to our export trade. Nor do I think that this will enable us to sell more cars in the Common Market countries. If a Volkswagen is imported here it pays the same Purchase Tax as our own cars. The same applies to the Fiat or the Simca, and when our motor cars enter Common Market countries they pay basically whatever taxes are paid on cars in those countries. It is a matter of what one makes on the roundabouts one loses on the swings. This applies to countries on both sides of the Channel. It does not make any difference.
The other factor is that, while it would be a good thing, if it would lead to a substantial increase in employment, that we should sell tens of thousands more motor cars, one must remember that for the 5 million or 6 million people—or whatever the present number is—who already have cars, this change gives no incentive at all. The cars which they would trade in have dropped in value roughly by the same amount as the reduction in Purchase Tax. It is only to those who would buy a new car or a further car that this will be a real incentive.

Mr. Gresham Cooke: That is just not true. The hon. Member for Dunbartonshire, East (Mr. Bence) has already told us that his car has fallen in value and, therefore, the marginal motorist, so to speak, who might not have been able to afford a car is now able to afford a cheaper second-hand car.

Mr. Fernyhough: The hon. Gentleman is quite wrong. My hon. Friend told us that he thought that he would be able


to buy a new car because of the reduction in Purchase Tax, but when he was told how much the price of his own car had fallen he decided that he would not go in for a new one. The same considerations will apply to tens of thousands of ordinary people.
This change shows how the Government have no idea of how to deal with the economic problems which beset the nation today. It is only eighteen months or so since the Chancellor's predecessor brought in the regulator. The level of Purchase Tax would move up and down by 10 per cent. if there was need to give the economy a blood transfusion and the regulator would be used to bring down Purchase Tax overall, on everything, not selecting special items or industries for special treatment. The present Chancellor has overthrown that. The regulator has gone by the board. All the hours of discussion we had on it were to no purpose. The right hon. Gentleman has singled out for special treatment one industry, hoping that it would produce the necessary miracle.
I want the Chancellor to tell me what will happen if he does not get from the 25 per cent. Purchase Tax in the present year the money which he would have got from the 45 per cent. tax. On whose shoulders will the additional burden be placed? If he finds that this reduction in Purchase Tax is not the stimulus we need in the North-East, Scotland, South Wales and Belfast, what other remedies has he in mind?
If the Chancellor believes that the paltry efforts of this Government will produce work on Tyneside, in Belfast, in Scotland and in South Wales, he sadly underestimates the problems confronting him. I wish that they would I want the 540,000 who are now unemployed to be given work, but I do not believe that measures of this kind even point in the direction of providing the new jobs which are necessary.

9.20 p.m.

The Chancellor of the Exchequer (Mr. Reginald Maudling): As your predecessor in the Chair said, Mr. Deputy-Speaker, the debate is necessarily on a fairly narrow issue and we cannot go into the wider matters of economic policy

which have been hinted at in some of the speeches.
I think that my answer to the first question asked by the hon. Member for Jarrow (Mr. Fernyhough) is that, in my judgment, it is possible and desirable at this stage to reduce the overall burden of taxation, not shift it from one person to another, because there is slack in the economy. My answer to his second question is that the measures I have taken to deal with the problems in the economy as a whole go far beyond the particular action we are discussing now, and it would not be reasonable to discuss one's whole policy in a debate of this sort which relates to only one facet of it.
I think that we have had six speeches on the Order, and my count of the score is four in favour and two "Don't knows", which I think is probably a reasonable average to expect.
The first question asked by the right hon. Member for Battersea, North (Mr. Jay), and echoed by the hon. Member for Manchester, Cheetham (Mr. H. Lever), was. "Why do it now? Is it reasonable from the point of view of Parliamentary control? Why not have a Finance Bill?" In my view, the answer is clear. I think it right to do it now because it needs to be done now. I am being pressed on all sides to do even more by way of taxation. I think that the right hon. Member himself implied that it would be desirable to do more. I think that it is right to reduce this Purchase Tax now in the interests of the economic situation. It would be wrong to wait for the Budget because, if there are idle resources, we should do what we can to bring them into use as soon as possible and not be tied to what I think the late Aneurin Bevan, in a very striking phrase, referred to as the habits of a pastoral society.
I think it desirable to do it now, and I think, also that it was quite proper to use the machinery so thoughtfully provided by our predecessors to make a change of this kind by Order. Control by Parliament has its effect in our debate this evening, just as it would if what I have done were part of a Finance Bill.

Mr. Jay: The right hon. Gentleman cannot believe that. He knows that on a Finance Bill we can propose Amendments, whereas we cannot do that now.

Mr. Maudling: I think that the degree of Parliamentary feeling is evidenced by the attendance at the debate. I do not think that hon. Members, on the whole, feel that Parliamentary privilege is affected by what we are doing. The purpose, I should have thought, of the introduction of these powers some years ago was to be able to take action rapidly and effectively in situations such as that which we are in at present.
The right hon. Gentleman raised the point about the differential with other mechanically propelled vehicles like three-wheelers and motor cycles. That differential arose fortuitously in 1951 when the rate on motor cars was stepped up steeply to 66⅔ per cent. for reasons of preserving steel and the economic situation at the time. Although I recognise that the people making motor cycles and those making three-wheelers have been considerably affected by this change, I do not think that they have a claim to maintain permanently a price or tax differential over the four-wheeler that they have enjoyed fortuitously for some years.
The other point that the right hon. Gentleman made was that the reasons which I gave in my speech on 5th November for this change were not my real reasons. If he does not believe me when I say something, it is not much good my saying it. I meant what I said at the time, and I still mean it.
My hon. Friend the Member for Kidderminster (Mr. Nabarro) in a helpful speech—I see that he has moved slightly to the left, but I do not think that that has any political significance—

Mr. Nabarro: No. When my right hon. Friend tells me that I have made a helpful speech, I elevate myself on to the P.P.S's bench at once.

Mr. Maudling: What will happen when my hon. Friend makes two helpful speeches I shudder to think.
I particularly want to deal with my hon. Friend's point that this is a Common Market measure, because it was taken up by several hon. Members opposite. In my view, this measure is desirable whether or not we enter the Common Market. If we enter the Common Market, I think it is clear that there will be great difficulty in having rates of Purchase Tax on motor cars

radically different from the rates ruling in other parts of the Common Market. If we do not enter the Common Market, it will be all the more important to give our industries every possible encouragement in the very severe competitive battle in export markets which will emerge. I regard this change as desirable whether or not we enter the Common Market, and I hope that the hon. Member far Manchester, Cheetham will be satisfied with that answer.
The hon. Member for Dunbartonshire, East (Mr. Bence), who is in favour, I gather, of eliminating all indirect taxation, welcomes this example thereof. I disagree with him in his suggestion that the reduction in Purchase Tax will not provide a stimulus to the purchase of more motor cars for a long time—for two years, I think he said. I find this hard to believe. I share the view of one of his hon. Friends who said that, if that is true, I might have increased the tax rather than reduced it. The price of second-hand cars has fallen substantially. That must mean a much larger ownership of second-hand cars because they are cheaper, and total car ownership will increase. It will take some time to work itself out. There will be a bigger demand for second-hand cars at lower prices. To reduce the price must mean that there will be an increase in the consumption of the article.

Mr. Bence: I said that there would be a time-lag of about 18 months because of this. I said that before the war we used to say that there was about eight months' time lag if the second-hand market dropped 10 per cent.

Mr. Maudling: I do not agree with the hon. Gentleman. I think that he is over-estimating the time-lag. It is difficult for us to draw any conclusions from the figures in a month or two. This is the time of the year when the market is falling. It is another reason for taking action of this kind, when the motor car industry normally runs into a slack seasonal period.
My hon. Friend the Member for Twickenham (Mr. Gresham Cooke) pointed out the very widespread nature of the motor car industry, which is one of the main reasons why I selected it for this action. The hon. Member for


Cheetham made an important point about the effect on exports of different levels of taxation. Whether one says that higher taxation encourages exports by making the home market more difficult or whether the lower rate does it, one has to be practical and not doctrinaire. There are arguments on both sides. In the past, when I was at the Board of Trade, I experienced occasions when too vigorous a home market certainly diverted goods from the export market and encouraged imports. On the other hand, it is true, as the hon. Gentleman implied, that a strong home market can provide a basis for a reduction of costs and thereby provide a basis for more competitive efforts overseas.
One has to consider a particular industry at a particular time. In this industry, in which there is substantial capacity for expansion, I am satisfied that an expansion in the home market can lead to reducing costs per unit and to a more competitive position in overseas markets, and there is capacity at home to produce more. Increased home consumption will not drag in more exports nor cause the diversion of cars from the export market to the home market. I have had very firm assurances from the motor industry on this point, and, in view of its excellent record in exports markets, I am satisfied that this will be so. It will help it considerably with its exporting problems.
I do not wish to enter into the broad economic questions, but might I summarise the position briefly? The problem that I was facing at the time that I introduced this proposal was the need for a stimulus to the economy, but a stimulus of a selective kind—that was why I did not use the regulator—because consumption was rising and is rising, but investment in manufacturing industry was flagging and because the need to increase exports even more vigorously is apparent if we are to have a sustained rate of growth. I am anxious in anything I do to stimulate the economy to introduce measures which can be sustained

and which make sense when there is Slack in the economy and will continue to make sense when the slack is taken up.
I want to get away from the belief to which reference has been made. It would be right to concentrate on measures which stimulate investment and assist exports. The motor industry was a special case because it is right at the hub of the whole engineering complex of this country and employs, indirectly Or directly, at least half a million people whose employment gives confidence to people throughout the country and the engineering industry and indirectly will help even the North-East.
The motor industry has made and is making an enormous contribution in Scotland, Merseyside and South Wales, but not, I regret, to the North-East. I assure the hon. Member for Jarrow that this was not for lack of trying. I should have been happy to see a big motor car firm go to the North-East, but we did not succeed in achieving this. The entry of the motor car industry into Scotland, Merseyside and South Wales has made and is making a very great difference to the people there. Anything which encourages the home motor car market will help the employment problem in those areas. I know that it is only an assembling industry but if we take the kind of capital being invested in Pressed Steel art Bathgate and Rootes at Paisley it has brought much vigour and will be of considerable help to the people of the area.
From the export point of view, this industry in its present posture can provide the larger requirement for the home market without detracting from exports, in fact making them more easy by spreading the very high level of overheads in the industry over a larger total volume. For all these reasons, I believe that this particular move was the right one made at the right time and that it will help the economy and those areas where unemployment is high.
For these reasons, I ask the House to approve the Order.

Question put and negatived.

PRISONERS (BOOKS AND PERIODICALS)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Hughes-Young.]

9.31 p.m.

Mr. John Dugdale: We have just been discussing a matter of considerable interest to many people in this country. I propose to discuss a question about one single man—and not a very important man—a constituent of mine, who is now in prison. I know that the House will always agree that the case of one man has as much right to be discussed as the case of a whole industry.
This matter begins with a letter I received,written on 14th March from the father of this man. This was the request I received:
Could you please give me some information. You see I have a son in Camp Hill Prison, Newport, Isle of Wight. He wrote and asked me if I would send him a book on laws. So I bought a book called Criminal Laws and sent it to him. Now he's wrote back and told me that he's not allowed to have it.
Could you please write back and tell me why this is, as it may improve him when he comes out.
That seemed a perfectly reasonable request.
I wrote to the Under-Secretary of State for the Home Department and asked why it could not be met. On 6th April I received a letter which said:
In certain circumstances, such as to assist the prisoner in the preparation of an appeal, prisoners are allowed to purchase legal books or have them sent in by relatives or friends, but such books are issued for a limited period and for a specific purpose. As Daffon could give no convincing explanation as to why he wanted this book, the Governor refused his request. I can see no reason to interfere with his decision.
This seemed a somewhat arbitrary line to take and I pursued the matter further. I wrote again and received another letter on 27th April. It said:
This is essentially a matter in which the Governor, acting as the Commissioners' agent must be allowed to exercise discretion and one of the points he has to consider is whether the circulation in the prison of the book in question is likely to endanger good order and discipline.
I think that that is a ridiculous answer. Mr. Daffon, senior, also thought so and he posted the book to his son in prison at a later date. I am not absolutely

certain about the dates but it may be that the Under-Secretary knows them exactly. The man in prison was allowed to see the book for one week. In other words, the Governor completely changed his mind. He did not mind it being seen for a week and there was no question then of good order and discipline. So far as I know, there was no riot in the prison or anything that should not happen there. The Governor changed his mind but the position in the prison remained as it was before.
Since then the book, apparently, has been held by the Governor. That seems an extraordinary act. The Governor, who is charged with keeping good order and discipline, has held this book, which is not his property but the property of Mr. Daffon, senior. It is probably a book of some value. Why should this be so? I should like an explanation why this book is held by the Governor and not allowed to be given back to the owner, Mr. Daffon, senior.
On what principle does the Governor or the Home Secretary work in this matter? What kinds of books are allowed to prisoners? Would this man have been allowed to have Lady Chatterley's Lover? Would he have been allowed to have Crime and Punishment, which after all deals with a subject with which he is directly concerned? Would he have been allowed to read Macbeth, which is a story of a very sensational murder. Would that book be withheld? Would he be allowed no book? Would he be allowed books of light literature or learned books? What books may he have? There seems to be nothing to show any system on which the Governor exercised his discretion. It is important that we should know about this. On 8th November, the Under-Secretary said:
A request from a prisoner for a text book of criminal law for the purpose of serious study would not usually be refused, but the Governor was not satisfied that this was the object of his request."—[OFFICIAL REPORT, 8th November, 1962; Vol. 666, c. 1137.]
How would it be known that it was for serious study? What exactly is serious study? How serious has it to be?
We may be told that the only reason this man wanted this book was in order to evade the law. That may be so; I do not know. I am not pretending that this man is a Chessman, trying to


improve himself until he can write books on law. I should like to know if the Home Office thinks that he would evade the law by having this book. If so it seems strange to take so much trouble to keep it from him when so many people, by employing taxation experts and so on, are able to evade the law constantly when they are out of prison. It may be that this man was doing no more than they are doing in discovering methods of evading the law.
I should have thought that it would be better that he should have the book and learn about the law. It may be that the Under-Secretary takes the view that it is better that criminals should be kept ignorant of the law. "Keep them stupid, keep them good" may be his principle, I do not know. To me, it is not a good principle on which to work. I see no reason why this man should not have the book.
I hope that the Joint Under-Secretary of State will be able to give an explanation, because it seems to me that the action of the Governor, which the hon. and learned Gentleman has specifically supported in letter and in answer to a Question, is high-handed, illegal, dictatorial and stupid. I cannot see why the hon. and learned Gentleman should support such action.

9.38 p.m.

Mr. Peter Emery: I have listened to the case put forward by the right hon. Member for West Bromwich (Mr. Dugdale). I apologise to the right hon. Member for missing the first few moments of his speech, but, as he will realise, he was called a little earlier than is normal on the Adjournment. I had expected to be listening to him about ten o'clock.
It seems to me that in this case there is a considerable amount of depth and material and towards this end I should like to make one or two remarks. It seems imperative that in prisons or borstals books should be readily available. It is necessary to attempt to ensure that people who are detained by Her Majesty should have the opportunity to better themselves during their detention.
Obviously, problems will arise and there must be some control. I wish to refer particularly to a borstal in my constituency of Reading, where there are a large number of boys mainly at the

punishment end of their borstal training. I should like some assurances from my hon. and learned Friend the Joint Under-Secretary concerning their freedom to follow further studies during their detention at Reading.
Is whatever request that these boys may make for study and learning being met? Is it possible to supply the necessary facilities and background for the tuition which it is imperative that people in a bortsal should be able to obtain? These men are the younger element of the population and they should, if possible, be given and encouraged to take opportunities of reading and study in preparation for something useful that they can do both for themselves and for the community when their detention or training is finished.
I realise that my hon. and learned Friend might need notice, but I wonder whether he can give me details of the amount of training that takes place not only at Reading, but in other prisons and borstals. It is important that people should know about this and for us to be assured that my hon. and learned Friend does everything in his power to ensure that the need for the facilities which I have outlined is met.
The anxiety which may be felt in the case referred to by the right hon. Member for West Bromwich may create uneasiness, perhaps unnecessarily, in people's minds that everything is not quite as one might like it to be. I hope that my hon. and learned Friend can give us assurances about this.
Does my hon. and learned Friend have in his service trained librarians or other personnel who consider the problems which this whole question raises? The governor of any institution might have a considerable problem which is out of his depth in dealing with applications both for training and for books to extend the learning process. It is essential that he should have all possible advice available to him. I know that local authorities would be willing to assist if my hon. and learned Friend felt that he did not have all the personnel and assistance that he might require or that the governors of prisons or borstals might wish.
A considerable amount might easily be done in co-operation between


governors and persons who have to control prisoners or boys at borstals and the local education structure in the community in which these institutions are situated. The days have passed when there is any bad feeling about the desire of local authorities to co-operate with a prison or a borstal. I should like my hon. Friend's comments on this. There is a possibility of improving the training and the facilities available. It is perhaps a new suggestion that local authority co-operation should be used to a greater extent, not only in the supply of books, but in the provision of courses and arranging the study which is allowed during a person's training at a prison or at a borstal. I underline that my particular interest is towards the young offender, the boy at a borstal, where the possibility of being able to use some corrective influence is of the greatest importance.
Local authorities would be very happy to give this assistance. It would not cost much. I speak for my own authority. Any help that it could give, although it might be for people only temporarily in the borough, in reforming or assisting in the reform of a person at a prison or borstal would be not only gladly but happily given.
How much of this is being done? Can my hon. Friend tell me whether this has gone as far as we would like it to go? What schemes have been operating? How successful have they been? The background is not only the difficulties which occasionally arise. It surely must be the overall structure becoming much more important and poignant than one specific case where there appears to be a problem.
I am concerned that my hon. Friend may not be able to get the right people to give advice in the structure of the present system. Are there adequate supplies of all the right types of books? Are these readily available? What other instances of difficulty is my hon. Friend aware of? What other instances giving rise to concern has he come across within the last two years? In the running of any scheme like this there must be things which are not always quite as smooth and clear as we would like them to be. I should like my hon. Friend to deal with the background of this and the co-operation which local authorities give him.

9.50 p.m.

Mr. Michael Foot: My right hon. Friend the Member for West Bromwich (Mr. Dugdale)) very much deserves every congratulation, both for the diligence with which he has pursued this case and for deciding to raise it on the Floor of the House.
My right hon. Friend said that he was raising the case of one man. His first motive is to rectify the injustice which is done to one man, if injustice has been done, but, as he himself revealed, and as has been underlined by the hon. Member for Reading (Mr. Peter Emery), much wider issues are raised. What may be said by the Minister tonight and what may be decided in the future may affect a large number of people in our prisons during the years to come. Therefore, this is an extremely important matter.
The hon. Member for Reading represents in the House one of the most famous prisons in the whole country. I should like to imagine what would have been written by the most famous prisoner who was ever in that gaol if he had heard of the case which my right hon. Friend has recited.
The Minister and the Government must understand that they have a very strong onus on them to prove the case. The denial of a book to a man seems such an elementary offence that there must be an extremely powerful case to be presented for making it excusable in any sense at all, even if it can be excusable, which I have great reason to doubt.
I shall not spend much time on the details of this case, which my right hon. Friend has already covered. He says that books are allowed for serious study. He said that after one week this prisoner was denied the right to read, An Introduction to Criminal Law. I cannot imagine why anybody would want to read An Introduction to Criminal Lawunless it is for serious study. I do not imagine that anybody has ever read An Introduction to Criminal Law by Cross and Jones for light salacious reading.
I should have thought that, particularly when the book is allowed to a prisoner for a week—the hon. and learned Gentleman shakes his head. If the man was not allowed the book at all, the argument would be on a


different footing. There seems to be a conflict of evidence there, but the main argument stands even if the Under-Secretary is able to say that this seditious book was denied to the prisoner every time he asked for the right to read it.
What possible harm can it do for a prisoner to read a book on criminal law? If another man took the example of Alfred Hinds in that respect, would it do any harm? Prisoners have as good reasons, or even better reasons, for reading a book like that as have other people. We all know that people have been put in prison for offences they have not committed. I think that it happens extremely infrequently but, even so, prisoners should have a special right of access to law books. They should have special facilities for getting at them. The more they read about the law, the better.
The hon. and learned Gentleman is a lawyer, and most lawyers would claim that the more people read about the law the more they respect it—though some might differ from that view. Therefore, lawyers should be as eager as anyone to see that as many people as possible in Her Majesty's gaols should have access to law books. It is inconceivable that a man in gaol should be denied the right to read An Introduction to Criminal Law.
When the Under-Secretary replied to my right hon. Friend on 8th November last, he said:
I think that we have to leave discretion to the Governor in this matter … since, under the rules as they stand, there is no right to insist upon any particular book."—[OFFICIAL REPORT, 8th November, 1962; Vol. 666, c. 1137.]
The rules as they stand may say that, but the suggestions made by the hon. Member for Reading about seeking the cooperation of local authorities are good suggestions, and should he examined by the Government. But if the rules are not changed, or if they can be interpreted as they seem to have been done in this instance, enlarged facilities will not make any difference. Therefore, this case rests on the whole question of the rules as they stand.
The hon. Member for Reading asked whether it was right that the Governor should have the decision. Prison governors have extremely awkward tasks that

no one envies them. I am sure that most of them, probably all of them, act from a great sense of duty. I do not make any charges against them, but whether they are the best censors of the books people should read is another matter. I do not think that anybody should censor them, although there may be the question of how many books are available.
The Government should surely be eager to get prisoners to read as much as possible. Did reading a book ever do a man any harm? The whole onus is on the Government to suggest that the rules should be sustained at all. Or do some governors think that books might put unfortunate ideas into people's heads? Why should any person be denied the right to read a book? What other better prison occupation could they have? The hon. and learned Gentleman must very fully explain this very extraordinary situation.
Anyone looking through the country's history will see that prisons have been some of the best universities in the land. Some of the most famous of our writers learned to write in prison. Many people who have been sent to gaol, not just for political offences but for other offences, have made very good profit of their time there, and were able to do so only because they had access to the books. What would have been said if John Bunyan had been refused the right to read books—or Leigh Hunt, when sent to gaol by a Government even more deplorable than this one? But Leigh Hunt was allowed books.
The more I think of a prisoner being denied this right, the more furious it makes me feel, and the Under-Secretary should share that fury. I hope that his reply will show that he has inquired into the case much more closely than he had apparently done on 8th November, and that he is so alarmed at what occurred that he is examining the rules to see how they apply, not only in this prison but in the other prisons, and will take into account the proposals made by the hon. Member for Reading and by my right hon. Friend.
Before the Under-Secretary replies, I hope that he will think over the quotation I am about to read, and if he gives us an inadequate answer tonight I hope that it will keep him awake for many nights in future. The quotation is:
Without books God is silent, justice dormant, natural science at a stand, philosophy


lame, letters dumb, and all things involved in Cimmerian darkness.
Is it Cimmerian darkness that Her Majesty's Government wish to sustain in Her Majesty's prisons?

9.59 p.m.

Mr. Charles A. Howell: There is another aspect of this case which has not yet been raised and about which I am disturbed. I do not know how long this Governor has been at this prison, but I have had to take up with the Home Secretary the case of a prisoner who was refused paper and pencil. It has been said that a man may require a book to prepare his defence and this man may have wanted to prepare an appeal. It ought to be made clear that when an appeal is first put forward, the sentence automatically stops and then, if the appeal is rejected, the period taken in considering the appeal is tagged on to the end of the sentence. A prisoner loses time in that way if his appeal is turned down. My constituent had to write to me about being refused paper and pencil.

It being Ten o'clock, the Motion for the Adjournment of the House lapsed without Question put.

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Rees.]

Mr. Howell: Thi s incident has occurred in the same prison. The Home Secretary immediately gave instructions that the prisoner concerned was to have the facilities which he wanted.
It may be that there are barrack-room lawyers in prison—everybody knows what I mean by a barrack-room lawyer—and perhaps these are more aptly called prison lawyers. This prisoner could quote Sections of Acts in connection with which he wanted me to approach the Home Secretary to claim certain rights which it appeared to him that he was entitled to receive. He must have learned that from somebody somewhere in the prison, or there must be a library to which he has access. However, if there were not a library, presumably, as in this case, the prisoner would feel that he did not have the same facilities for an appeal, or that justice was not being done.
My constituent wrote to his father asking for a law book to be sent to him. Has this Governor suddenly stopped censoring prisoners' letters? The letters which have come from the prison have been censored by a prison officer, and if it was intended that my constituent should not have the book for which he had asked his father, the prison officer concerned should have told him that he was not entitled to have it and that if his father sent it, it would be confiscated. If moral justice was to be seen to be done, that is what should have happened. The Governor or the senior prison officer responsible for censoring letters ought to have prevented this problem in the first place, unless it is that he has a perverted sense of humour and allowed the prisoner to write for a law book which he was not to be allowed to have. I do not know what the cost of his book was, but it was a shameful thing that the father of a prisoner should have been allowed to buy it when the prisoner was not to be allowed to read it. I am bound to accept that all this was done in good faith.
If it is true, as I believe it is—and I hope that the Under-Secretary will tell me if I am wrong—that there is a prison library, all the man had to do was to say to the Governor, "I think that I have the right to appeal and I want to appeal and to do so I want the facility of this book from the library". I want to know whether when a man contemplates an appeal his sentence stops from that moment or from the moment when he makes his appeal. If my constituent had been a barrack-room lawyer and had known the ropes, he would probably have been able to get the book from the prison library without putting his father to any expense.
It is not for us to judge the form of literature or other reading matter which people may choose. I get a lot of pleasure from reading Erskine May, but other people might find it dull. Not everybody likes literature. It was a long time before I could understand why people should want to read ancient history, but one day, when I had nothing else to read, I found it interesting to compare ancient times with modern.
If the censoring officer and the Governor had no right to delete the man's request from his letter, would not it have


been better to have told the prisoner, "It is no good asking for this book. It will not be permitted when it comes"? If they had the right to do that, why did they fail so miserably to exercise it?

10.5 p.m.

The Joint Under-Secretary of State for the Home Department (Mr. Charles Fletcher-Cooke): This is an important matter of principle, and the right hon. Member for West Bromwich (Mr. Dug-dale) is quite right to raise it. I will come on to the specific case as soon as I can, but I think that I should first say a word or two in response to the more general questions about the facilities which prisoners have both for private reading and for further education, in response to my hon. Friend the Member for Reading (Mr. Peter Emery) and the hon. Member for Ebbw Vale (Mr. M. Foot).
The further education of prisoners is treated as an essential part of their training, and the visiting assistant commissioner has a special responsibility for education and welfare. He works in close co-operation with the Ministry of Education whose inspectors regularly inspect and advise on the educational work at prisons and borstals. The local education authority appoints full-time or part-time tutors to organise the work in all but the smaller establishments.
The work of professional teachers is often supplemented by voluntary tutors or by qualified members of the staff, and the object of all this of course is to counteract mental stagnation, to provide more valuable matter for thought and conversation than crime, criminal associations, and other similar conversations, and, in the words of the Gladstone Committee
To awaken the higher susceptibilities of prisoners",
or, in the words of the hon. Member for Ebbw Vale, to lighten them from Cimmerian gloom.
Particular emphasis is, therefore, laid on discussion groups and on such subjects as music, painting, modelling, drama and literature, and special attention is paid to the treatment of illiteracy because, as I think most hon. Members know, the remarkable change in character that comes over an illiterate once he ceases to be analphabetic is quite a remarkable work of redemption.
At the opposite end of the scale facilities are provided for prisoners of higher educational attainments to study for the General Certificate of Education, or even for Matriculation and degree examinations held by the University of London. Special technical classes are held for those taking vocational training courses who wish to prepare for the City and Guilds or other external examination, and a wide range of correspondence courses is available. All prisoners undertaking courses of study, whether in classes or privately, are provided with notebooks which may be taken out on discharge—this is a relatively modern concession, for obvious reasons—if properly used for the approved purpose.
As for libraries, in most prisons the county, city, or borough library has now assumed responsibility for the library which it treats as one of its branch libraries receiving a grant from public funds for the help which they generously afford. The stock of books is chanced at regular intervals, and if the prisoner needs technical books these are provided on request. This development has greatly improved reading facilities, and prisoners are encouraged from the beginning of their sentence to make full use of these facilities. In all establishments prisoners now have direct access to the library shelves to change their books. There is a similar arrangement regarding periodicals, though for security reasons these periodicals must come direct from the publishers or from a bookseller.
Governors are required to provide at public expense for the benefit of all prisoners who are entitled to association a minimum of three different newspapers daily, and I would be happy to reassure the hon. Member for Ebbw Vale that although the choice of newspapers provided at public expense is within the discretion of governors they are obliged to have regard, as far as possible, to the wishes of the majority of prisoners in making the choice. But there is no ban on the provision of any newspaper or periodical. If the prisoner wishes to have one, other than those publicly provided he may do so, as a personal issue, at his own expense.
I now come to this case. Since the right hon. Gentleman mentioned the word "illegal" I want to make it clear at the outset, by quotations from the


prison rules, that whatever hon. Members may think about its desirability there is nothing whatever illegal in what the Government did in this case.

Mr. Dugdale: I did not mean that it was illegal not to allow the man to have the book, but it seems to me to be peculiar, to say the least, to keep the book, which belonged to the prisoner's father.

Mr. Fletcher-Cooke: No request has been received from the prisoner's parents for the return of the book. If such a request were made the book would be returned, but they have not asked for its return.
The rules are Statutory Instruments, which are added to from time to time. They are laid, and the last complete set was laid in 1949. I do not think that at that time any objection was taken to the rules, which I shall now read out. The rules are definitive. Rule 6 says:
The purpose of training and treatment of convicted prisoners shall be to establish in them the will to lead a good and useful life on discharge and to fit them to do so.
This is the guiding light for governors in that part of their duties which relates to the training and treatment of prisoners.
Rule 29 says:
The Rules in this section shall be applied due allowance being made for the difference in character and response to discipline of different types of prisoner in accordance with the following principles:—

(i) discipline and order shall be maintained with firmness but with no more restriction than is required for safe custody and well ordered community life;
(ii) in the control of prisoners officers shall seek to influence them through their own example and leadership and to enlist their willing co-operation;
(iii) at all times the treatment of prisoners shall be such as to encourage their self-respect and a sense of personal responsibility."
It is, therefore, against a general background of discipline and control that Rule 69, which is of broad application in this case, is to be considered. That rule reads:
Prisoners may receive books or periodicals from outside the prison under such conditions as the Commissioners determine.
That rule is in the section relating to education and libraries, to which I have referred.
In this case, from the inquiries that I have made, including an inquiry from the Governor, at no time was this prisoner allowed this book—not for a week, or at all.

Mr. Dugdale: That is contrary to the information given to me by the prisoner, but if the Governor says so—

Mr. Fletcher-Cooke: That is the information that we have—at no time was this book allowed into the prison. I am not quite sure which way that cuts, but that is the information we have from the official sources.
This was a prisoner serving a sentence of three years' corrective training—for office breaking and larceny and assault on a police officer—at Camp Hill Prison, in the Isle of Wight. There was sent to him, in December, 1961, by his parents, this book, entitled An Introduction to Criminal Law, by Cross and Jones. The introduction to the book says:
This book is primarily concerned with criminal law from the point of view of lawyers in general and the law student in particular.
In response to the point made by the hon. Member for Birmingham, Perry Barr (Mr. Charles A. Howell), I am fairly sure that the time for appeal in the case of this prisoner had expired a long time before he asked for the book. There was, therefore, no question of its being used for the purpose of an appeal.
As for the suggestion that he ought to have been stopped at an earlier stage by the censor, I am told that the censoring officer would not have taken it upon himself to censor a request for a certain book, because that would be going beyond his functions. The censoring is not done by the Governor. If he did that, he would do nothing else.
The prisoner had been found by educational tests to be below average intelligence and with very low educational attainments. It was evident that he would have great difficulty in understanding the book, and his criminal record and behaviour in prison made it sufficiently clear to the Governor, in whose discretion this matter is placed, that his interest in crime could hardly have been described as a healthy one.
In passing, I might say that there have been many cases, and I hope to quote some, where books on crime and books of this sort were allowed to


prisoners either for the purpose of their own case or for the purposes of general study if they were apparently of a sufficiently intellectual calibre to be able to reach that stage. It was natural, therefore, for the Governor in this case to inquire into the reasons why the prisoner wished to have this book.
It is wrong to say, as I think it was suggested but not pressed by the right hon. Member for West Bromwich, that there is any veto on books on criminal law. For example, in 1957 a preventive detention prisoner at Northallerton Prison asked for permission to buy the latest edition of Prisons and Borstals. He wished to study various reforms outlined in the book as it was his intention to submit various proposals to the Home Secretary following his discharge. Again, a preventive detention prisoner in Parkhurst asked for a copy of the Criminal Justice Bill, now the Criminal Justice Act, 1961, and the Report of the Advisory Council on Corporal Punishment. These were allowed. In 1958 a prisoner in Holloway asked for Archbold's Pleadings and a book on manic depressive psychosis. This was allowed because the prisoner genuinely required both for prosecuting her appeal. A prisoner in Leeds a little earlier applied for two books, Outline of Criminal Lawand a Government Report on sexual cases. This request was allowed because it related directly to his own conviction and sentence.
The right hon. Member for West Bromwich mentioned Lady Chatterley's Lover and was quite right in saying that the problem of supplying this book has arisen in quite an acute form. Not unexpectedly, the problem arose in 1960 as to whether it should be allowed in its unexpurgated form into prisons and borstals. The decision was made that it could be allowed to those over 21 but not to borstallers and young prisoners under 21. Again, what is apparently a perfectly harmless work, as one would have thought—Crockford's Clerical Directory—was forbidden to a prisoner whose method of earning his living was to pose as a clergyman and persuade people to part with their money to him. It was forbidden on the ground that it was suspected, although it was only an assumption,that it might provide

him with a lot of information which he could subsequently use.
Finally, a prisoner in this very prison recently wanted a book on civil law which he named and which was not available in the prison library. The Governor asked the chairman of the board of visitors, who was a solicitor, if he could help him. The chairman managed to obtain the book and he loaned it to the prisoner. Therefore, it is not right to say that there is anything like a large or extensive veto. The number of occasions on which books are refused is very small indeed. If the prisoner had been considering or preparing an appeal or defending himself in other criminal proceedings outstanding against him, no objection could have been taken.

Mr. Dugdale: What would have happened if the prisoner had given a reason similar to that given by the other prisoner who wanted to prepare a treatise on borstals? If this prisoner had given some such reason, quite apart from any question of appeal, would that have been enough?

Mr. Fletcher-Cooke: If the reason seemed a reasonable reason—the Governor has a wise and human discretion in these matters—it would probably have been accepted; but the Governor has to take into account all the circumstances, including the mental capacity of the person making the request.

Mr. M. Foot: The hon. and learned Gentleman is, conceivably, proving that the granting of the book to this prisoner would not have done him any good. Can he say what conceivable harm it could have done to the prisoner?

Mr. Fletcher-Cooke: I have not seen the prisoner and I do not know the circumstances in the prison. It is not for me to speculate on that. If the prisoner had given some indication since his sentence began, and before this question arose, that he was genuinely interested in study, either the study of the law or of subjects connected with it, or even that he was keen to improve his general education—

Mr. Foot: We have all got to start some time.

Mr. Fletcher-Cooke: —he would have been allowed the book.
He was given the opportunity to be more forthcoming about his reasons, but he did not take it. From his knowledge of the prisoner, the Governor formed the conclusion that study was not the real reason why he wanted the book. He therefore told the prisoner that he was not prepared to allow him to have it, but that, if he was dissatisfied with that decision, he could apply to the Assistant Commissioner of Prisons, who was visiting the prison the next day. This gave the prisoner the opportunity to explain to the Assistant Commissioner anything which he did not wish to tell the Governor. Such circumstances do sometimes arise.
The prisoner had a second opportunity to explain why he wanted the book. The Assistant Commissioner, if he had disagreed with the Governor's refusal, could have allowed the prisoner's request, for the Assistant Commissioner, among his other duties, has a special responsibility in matters relating to educational facilities for prisoners in the prisons which he visits. The prisoner gave no reasons to the Assistant Commissioner but simply asked to petition the Secretary of State. He was pressed to give a reason, but he gave none, asking merely that he might petition my right hon. Friend. In his petition he gave as his reason for wanting the book that, if he could get an idea about the rules by which we live, he would be able to keep from breaking the rules.

My. Dugdale: Very sensible.

Mr. Fletcher-Cooke: As the prisoner's previous history consisted of larceny, store breaking, office breaking, with an occasional assault on the police, the suggestion that he habitually broke the law through ignorance was patently absurd. Since it was clear that a study of this book would be of no assistance in the training of this prisoner to be a law-hiding citizen and that his real motive for wishing to read it was, if I may put it so, collateral and not likely to be conducive to the corrective training which was the sentence imposed upon him, my right hon. Friend the Secretary of State saw no reason to interfere with the Governor's decision.
As I have said, there is no question of confiscating the book. If the prisoner's parents want it, it will be returned to them carriage paid, but no request

has been made, since the right hon. Gentleman raised the matter, for the book to be returned, and, as far as I know—I am fairly sure of this—it remains at the prison.

Mr. M. Foot: Instead of all this paraphernalia which the hon. and learned Gentleman is giving us, would it not be much simpler for the Home Office to issue an instruction to all governors that the reading of books never did any harm and that, therefore, the Home Office hopes that governors will always, where they possibly can, allow facilities for reading them? It would not do any harm. All this great bureaucratic machinery, with appeals, to make sure that a book does not get into someone's hands where it might do harm is quite extraordinary. The hon. and learned Gentleman has not adduced one reason to show why this man might have suffered from reading the book.

Mr. Fletcher-Cooke: I canot assent to the proposition that no book of any sort ever does any harm to any prisoner. That may be the hon. Gentleman's view, but it was not the view when these Rules were passed in 1949.

Mr. Foot: Then the rules are wrong.

Mr. Fletcher-Cooke: The House of Commons of which the hon. Gentleman was a distinguished Member passed them quite happily in 1949. So far as I know, no dissent was made at that time. They work extremely well. Apart from the specific case of Crockford's Directory, there are other cases—they are very few —where it is thought that it would do the prison and the prisoner more harm than good, and I have sufficient confidence in the corps of prison governors to leave the matter in their hands. There is an appeal to the assistant commissioner. There are the library facilities of which I have spoken.
In my view, we cannot lay down the sort of absolute principle, which the hon. Gentleman asserts, that the governor must grant these requests. There are cases in which to do so would prejudice the good working of the rulings laid down in Rule 6 and Rule 29. Due allowance has to be made for the difference in character and response to discipline of a hundred different types of prisoners.


and neither the hon. Gentleman nor I but only the governor can have knowledge of that.

Mr. Dugdale: The hon. and learned Gentleman has read all about this case. He must know what the Governor's reasons were for thinking that this book would do harm to this prisoner. Or is he simply saying, "The governor, right or wrong", and nothing else matters?

Mr. Fletcher-Cooke: No, I am not saying "The governor, right or wrong" at all. The whole point of the procedure of appeal shows that it is understood that in these matters, as in others, it is human to err. However, within the society of a particularly tough prison such as this, where corrective training is going on—it is not like the borstals referred to by my hon. Friend the Member for Reading—I cannot speculate about what the effect of this book might have been on the prison, let alone on the prisoner. All I say is that the Governor has been given a discretion. Rarely is it exercised against any book that a prisoner wants.
I remember in Dartmoor during the summer, when I went over the place, the amazing facilities in the library there, not only for getting books, but for instruction and advice, both from the staff and from a lot of people who voluntarily gave their time in the educational field to the staff in all the different forms of intellectual and group activities that were going on, and the range of books that were available. The access to the shelves for the purpose of browsing in the library was evidently immensely appreciated, particularly in a long-term prison like that.
I think it wrong to suggest that this is anything but, as I said in my Answer to the Question, an exceptional case. I

must insist that the Governor retains discretion about what literature he allows in. For obvious reasons, he frequently cannot make his reasons public, because the discipline in a prison is often a matter of great security. We who defend him have therefore, in many ways, to defend him with one arm tied behind our backs.
I assure the right hon. Gentleman and all those who are rightly concerned to see that our prisoners are not denied any reasonable facilities for their literature or their education—

Mr. Charles A. Howell: Surely, this book is not classed as literature.

Mr. Fletcher-Cooke: The hon. Member's definition of literature may be a little different from mine. From the introductory passage which I have read to the House, it seems a rather stodgy form of literature. It is
from the point of view of lawyers in general and the law student in particular.
To describe it as literature—I hope that I am not slandering—might be thought to be giving Mr. Cross and Mr. Jones an accolade which I do not know whether they deserve. I was using the word "literature" in a compendious form. I stick to that, because I very much agree with the hon. Member for Ebbw Vale that this is a light to lighten the darkness of those who are necessarily kept in confinement. I assure the hon. Member and his right hon. Friend the Member for West Bromwich that it is the policy of the Prison Commissioners and of my right hon. Friend to keep that light burning and to increase its power, because only in that way can these people be redeemed.

Question put, and agreed to.

Adjourned accordingly at twenty-nine minutes past Ten o'clock.